Shanghai Business Review interviews RSA for its 2011 Industry feature article

12.21.2010

What were the major trends for the insurance industry during 2010?
China’s insurance market performed well in the past year and will continue to grow. In the non-life insurance sector, the growth rate in the first Q3 of 2010 was 31 per cent up from 23 per cent in 2009.

The market remained highly competitive in 2010. The non-life insurance market was still dominated by major local players, but we saw good growth for foreign insurers who benefitted from their larger capacity, global experience, quality service and unique capabilities.

In 2010 the motor insurance turned profitable for the first time, and occupied around 70 per cent of the total non-life insurance business. That provides further support for the whole industry.

For now, foreign insurers are forbidden to enter motor third party compulsory liability insurance market, but there are some positive signs that the Chinese regulator is considering opening motor third party liability market to foreign insurers in the future.

What were the challenges for this industry in 2010?
The industry still needs to work hard to promote the role of insurance as a provider of protection and effective risk management solutions. Major events provide us with a better opportunity to educate the public, but for historical and cultural reasons most people still feel that the government should take care of the risk for them.

Foreign insurance companies in China have geographic limitations, as they have been doing business here for less time than most local companies, and companies can only do business in areas which are licensed.

What is your outlook for the insurance industry and your company in 2011?
Capital and solvency will be the key issues. Some local companies may be required to raise capital to meet the demands of solvency regulations. Foreign companies would feel relatively less constrained, as they are able to draw on capital from their parent companies, whereas some local companies may be dependent on the capital market or JV partners.

The most exciting thing about China is still its low market penetration, though more demand – and more competition – is expected for both local and foreign insurance companies over the next few years. The key is finding an effective way to reach out to new customers. We will also see a greater variety of insurance products for business.

The continuous improvement of the regulatory framework, which has been gradually brought up to an international level, will quicken the opening up of the market. For RSA, our Jiangsu branch is going to open in the Q1 of 2011; that should allow us to triple our customer base. As a non-life insurance company, we will keep focussing on Marine, Casualty and Construction and Engineering. We will also keep a close eye on the regulator’s decision on compulsory motor insurance.

What do you see as the opportunities or constraints for the logistics industry in Shanghai during the coming year? How does this compare with the other regions in China?
While Shanghai remains very important, the local governments from the second and third tier cities are also keen to accept foreign insurance companies. RSA looks to open more branches in these cities.

Ultimately, the process will be driven by customer needs and opportunities to bring our capabilities to the market.