Reinsurance sector in China expands, restructures
Source:Cfbond 2018-10-12 18:26
China's reinsurance sector is experiencing rapid expansion and a new round of structural adjustment, said a report of Shanghai Securities News on Friday.
On Oct. 11, China Banking and Insurance Regulatory Commission (CBIRC) approved a reinsurance firm from South Korea to set up a branch in China, the first newcomer at China's reinsurance market in two years and the eighth foreign company operating this business in the country.
Reinsurance, as a field of business by which insurance firms share risks they have undertaken with their reinsurance counterparts, serves to improve insurers' ability to meet payment claims, offer new policies and spread risks. Over the years, these functions have been the fundamental drivers behind the rapid development of China's reinsurance market.
Aside from the above South Korea company, over 30 other domestic and foreign players are queuing up for an approval from the CBIRC to enter China or a business license to start their operations.
The expansion of China's reinsurance sector is accompanied by ongoing sectoral adjustments, marking a shift toward focusing more on risk management.
This shift was to some extent driven by the updated supervisory framework for insurers' solvency, which was put into effect in 2016 by China's Insurance Regulatory Commission (CIRC), one of the two predecessors of CBIRC. The framework gave more priority to risk management over other considerations.
The introduction of this framework has considerably reshaped the business activities of reinsurers in China. As insurance companies obtain financing through other channels, reinsurers are turning more attention to the provision of risk management solutions.
In the future, China's reinsurance market will face three-fold challenges, said experts.
The supply and demand of reinsurance services will undergo changes; heated competition among insurers may have impacts on the reinsurance market; overcapacity in the reinsurance sector will remain due to previous capital influxes.