Asia CFOs See Regulation as Key to Growth of China’s Insurance Market

Domestic Chinese insurers like to point to bancassurance as the key to sustain their business growth, but foreign insurance players say finding a good local joint venture partner is an important strategy as China's insurance market expands.

One thing panelists at the 5th Asian CFO Insurance Summit 2011 in Hong Kong agree on is that regulation reforms in China will change the landscape of the market environment and drive those players to modify their respective strategies in a huge and rapidly growing market.

Since China's insurance and banking regulators in 2009 allowed banks and insurers to mutually acquire and hold equity stakes in each other, all five of the country's biggest lenders have formed a joint venture with insurers, which has also changed the "game rules" of the market, said Jason Yao, group chief financial officer of Ping An Insurance (Group) Co. of China, at the summit.

Now, insurers that don't have their own banks or banking partners will face intense competition, even as banks will need to take some time to get acclimated to the insurance business, noted Yao, who is also the executive director of Ping An. Over the past two years Ping An developed its own lender, Ping An Bank, and acquired Shenzhen Development Bank.

As a foreign player in China, Gerard Yang, MetLife Asia Pacific's CFO, said there are "so many restrictions in China," a scenario he said has to change. Yang noted that "getting good [local] joint venture partner(s) and looking at ways to balance the insurers' growth" are important to the success of foreign insurers in the country.

The biggest challenge of local life insurers, according to Yao, is rising interest rates are damaging their investment returns in the short term, although the China Insurance Regulatory Commission is gradually "open the door" to insurers to invest in commercial properties.

"Growing the number of agents in a healthy manner" as well as productivity improvements are also significant issues for Chinese insurers, said Yao.

In Asia, Yang said insurers are now facing challenges coming from strong gross domestic product growth, inflation pressure, increasing interest rates, equity market volatility, aging populations and regulatory changes.

Insurers should also pay attention to include building an enterprise risk management governance framework, developing diversified and competitive channels and products and leveraging opportunities in retirement markets, noted Yang.

Yang added that MetLife is planning to tap the Southeast Asia market, including Singapore, Thailand, the Philippines and Indonesia, in the coming years in line with its continuous business transformation.

Metropolitan Life Insurance Co. currently has a Best's Financial Strength Rating of A+ (Superior).

(By Rebecca Ng, Hong Kong news editor: Rebecca.Ng@ambest.com)