Foreign insurers are meeting a wall of resistance as they try to penetrate the Chinese market, new analysis from
The report, “Foreign Insurer Strategy in China: Advance or Retreat?,” notes the number of foreign-based insurers in China has grown to 45 as of September 2011, compared to 13 in 2004 and the market as a whole has grown to $236 billion in annual premiums as of 2010.
However, as the name of the report implies, companies may well wonder whether the growth appeal of the market merits the travails of operating in it. The report’s author, Moody's VP and Senior Credit Officer Sally Yim, says foreign insurers are in an inherently inequitable position relative to domestic insurers in China. Foremost among the challenges are significant regulatory hurdles, from licensing delays to restrictions on ownership and product lines. Other challenges include an increasingly competitive marketplace, rising operating costs, a lack of brand recognition, and difficulties in gaining access to distribution channels.
The nature of these challenges is clearly reflected in market share figures. As of September 2011, foreign life insurers commanded a market share of 3.7 percent, while foreign property/casualty insurers represent only 1.1 percent of the market. Moreover, among the 46 foreign insurers operating in China in 2010, only 11 made a profit, which contributed negligibly to their global profits.
"Foreign firms have made little headway in the Chinese insurance market and to this day still suffer from low market shares and low profitability, despite significant growth opportunities," Yim says. "Recent withdrawals by some foreign insurers suggest that for some, the growth story is losing some of its appeal. One key question raised by these withdrawals is whether they mark the beginning of a broader retreat by foreign insurers.”
