China may be home to one of the fastest growing insurance markets on the planet, but Xiang Junbo, chairman of the Chinese Insurance Regulatory Commission, says that the industry is faced with major challenges this year. Last year, Chinese insurers saw return on investment results drop by 3.6%. When coupled with the now notorious natural disasters of 2011, the results have rocked the nation’s insurance industry somewhat. Regulators say that if the coming challenges cannot be overcome, the growth of the insurance market may grow beyond the industry’s ability to accommodate.
In an attempt to ensure that insurers do not fall behind the curve, the Regulatory Commission is encouraging companies to embolden their capital reserve. Higher reserves will help companies survive unforeseeable disasters while making them able to continue protecting policyholders. The Commission also plans to help companies shift focus toward hybrid and convertible bonds, which would help boost the performance of investments throughout the industry and keep insurance ratings fairly high.
Xiang was appointed in October last year and has been working to remedy the problems that threaten to cripples the nation’s insurance industry. The country has been considering allowing foreign insurers into the market, but these plans may be delayed somewhat as the Regulatory Commission focuses on emboldening native insurers against the economic, political and natural disasters that it will face this year.