China’s insurance market is experience major growing pains, according to a report from Standard & Poor’s, a credit rating agency based in the U.S. The Chinese market is, by all accounts, enormous and the potential for success in second to none. The full breadth of this potential success, however, is open only to Chinese insurers. Native insurers are now facing demand for coverage that they are having trouble meeting. Many companies, including New China Life, one of the largest life insurers in the country, are plagued with capital shortfalls due to the rapid growth of the market.
Chinese insurers have acquired a large number of new clients in a relatively short amount of time. The sheer number of new clients purchasing coverage has lead to a steep increase in liability, which insurers have had trouble accommodating due to the gradual flow of premium money. This is a major problem for large insurance corporations, but the trouble is trickling down to smaller companies as well.
The answer may be to open up the various sectors of the Chinese insurance market to foreign companies. The central government has already been exploring ways to make this a possibility, but a new report from credit rating agency Moody’s highlights the importance of allowing foreign companies to compete in the market. According to the report, only 11 of the 47 foreign insurance companies doing business in China made any kind of profit. These companies, however, are capable of handling the demand for insurance coverage, if only they were allowed to.