Favorable regulatory landscape to drive Chinese reinsurance market at 6.8% CAGR through 2024, forecasts GlobalData

The China Banking and Insurance Regulatory Commission (CBIRC) has recently proposed revisions to the reinsurance regulatory regime. Against this backdrop, China’s reinsurance market is expected to grow at a compound annual growth rate (CAGR) of 6.8% during 2019-24, forecasts GlobalData, a leading data, and analytics company.

The proposed regulations aim to strengthen the risk management framework for the reinsurance business and help develop the industry. GlobalData reveals that China’s reinsurance market growth will be driven by property and causality (P&C) insurance backed by the regulatory push for the growth of the local reinsurance market.

Ashish Raj, Insurance Analyst at GlobalData, comments: “China offers a lucrative reinsurance market for local and foreign reinsurers. The proposed regulations aim to control loopholes that may lead to tax evasion, profit transfer, and high foreign reinsurance exposure.”

CBIRC is also encouraging foreign reinsurers to establish offices in China. Currently, 13 reinsurers are operating in the country, which includes seven foreign reinsurers. Of these, Korea Re and XL Insurance (China) Company Ltd, a subsidiary of AXA, obtained operating licenses in 2019 and 2020, respectively, while few others are awaiting approval.

The proposed regulations allow an eligible insurer to establish an independent reinsurance department. Additionally, CBIRC permitted onshore reinsurers to enhance their capital limits, which will increase their reinsurance capacity. In 2020, the Beijing branch of Swiss Reinsurance Company increased its registered capital from CNY300.0m (US$43.4m) to CNY1.4bn (US$202.9m).

To control and monitor overseas ceding, CRIBC is considering provisions to regulate the concentration of reinsurance business, exposure to overseas reinsurance risks, and liquidity management. The regulation requires insurers to report details around the purpose of reinsurance placement, retention and reinsurance policy, risk management, and control mechanisms to ensure the placement complies with regulatory requirements.

Mr Raj concludes: “Local reinsurance market in China is expected to grow due to favorable regulatory environment as the new revisions aim to increase local reinsurance capacity.”

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