In many respects, the conditions and challenges in the Chinese non-life sector are similar to those confronting global insurers: capital oversupply, competition from alternative capital, and regulatory pressure in the face of margin compression. However, these impacts are even more pronounced in China due to a quicker pace of regulatory change, greater demand for product digitalisation and the technology sector emerging as a key supplier of capital and innovation. All this is being compounded by an economic backdrop of slowing growth, debt deleveraging within state-owned enterprises and the uncertainties of a protracted and potentially acrimonious trade dispute with the United States.
Despite these challenges, the Chinese insurance industry is currently on course to meet the government’s target of 5% of GDP by 2020. However, profitable growth will not be shared evenly across the market as gaps in performance and access to capital between large and small insurers continue to widen. In short, the industry can expect to operate in an increasingly complex and highly dynamic environment in the near to medium term (see Figure 14).
This makes the CBIRC’s work all the more important. The sector’s health should stabilise and benefit as the CBIRC adopts an increasingly transparent and more prescriptive approach to rule-making whilst, at the same time, fostering greater access to overseas capital and expertise. This is a positive development that is critical in laying the foundations for a more mature and profitable marketplace in the long term.
FIGURE 14: THE CHINESE P&C INDUSTRY: OPERATING IN A HIGHLY COMPLEX AND DYNAMIC ENVIRONMENT