China to let banks and postal services into insurance sector
China plans to allow its banks and postal services to set up insurance companies as it moves to diversify the structure of the expanding industry.
The country’s insurance regulator is studying the possibility of letting commercial lenders and postal service bureaus establish insurance ventures, Wu Dingfu, chairman of the China Insurance Regulatory Commission, said Friday at the regulator’s annual conference in Beijing. “We are encouraging more entities to join in the insurance sector, and the potential participants include large and medium-sized state-owned enterprises, banks and the postal services authority,” Wu said.
Currently, insurance providers in the mainland include foreign financial institutions, home-grown insurers and large SOEs such as China National Offshore Oil Corp and China Minmetals Corp.
Several domestic lenders _ including some of the country’s largest banks, such as Bank of China, China Construction Bank and Bank of Communications, or BoCom _ have been seeking opportunities to enter the insurance sector to add more revenue sources.
China’s insurance market expanded by 14 percent to 492. 7 billion yuan (HK$474. 2 billion) in 2005 from a year earlier, making it the 11th largest market in the world in terms of premium income, according to the CIRC.
China Post, the national authority of postal services, has teamed up with France’s CNP Assurance to set up a life insurance venture in Beijing. While China Post signed the agreement with CNP in 2002, the 50-50 joint venture is yet to start selling policies. “The joint venture [Sino-French Life Insurance Co] is still pending the final green light from the authorities to go ahead,” a source said.
Shanghai-based BoCom, the fifth- largest commercial bank in China, has plans to form a property insurance firm on the mainland through its Hong Kong subsidiary China Communications Insurance, Zhang Jianguo, president of BoCom, said in an earlier interview.
“If it comes true, there will be more capital coming into the Chinese insurance market,” said Connie Wong, an analyst at Standard & Poor’s in Hong Kong. “But it is too early to say what kind of impact this new capital will impose in the sector as it still depends on how much the banks and postal services will be allowed to invest in insurance companies. ” Foreign investors in China life insurance joint ventures are currently restricted to stakes of up to 50 percent. Investment by banks in setting up insurance subsidiaries also needs the approval of the China Banking Regulatory Commission.
Copyright © 2006 Financial Times Ltd. All rights reserved.
