Best’s Briefing: China Non-Life Insurance Outlook is Negative, But Improving Market Conditions Are In Sight

HONG KONG--()--A.M. Best has a negative market segment outlook on the non-life insurance market in China; however, A.M. Best does expect market conditions to improve slightly over the near term. A new Best’s Briefing, titled, “Market Segment Outlook: China Non-Life,” states that intense competition, increasing investment risks and a tightening regulatory environment will continue to create a challenging operating environment for Chinese non-life insurance companies.

The current market conditions are most favorable for the largest non-life companies in China. There are 85 non-life insurers in China, but the top five companies account for over 70% of market share, and although developed markets face tepid growth, China is the growth engine of the world’s non-life market, delivering a much higher growth rate than developed markets. The top five China non-life companies’ financial year combined ratio improved slightly to 97.8% in 2017 from a weighted average of 98.3% in 2016.

A.M. Best believes underwriting margins will remain under pressure for the medium term, especially for smaller insurers. As underwriting results overall remain marginal, the sector’s profitability historically has been highly dependent on investment returns. A.M. Best expects that non-life insurers’ investments will continue to deliver relatively volatile results, as most investment portfolios are highly concentrated in domestic holdings and thus subject to domestic investment market volatility. There is an increasing trend in investment allocation to loan-type and alternative investments, which increases both credit risk and the potential for asset/liability mismatch.

Nevertheless, the Chinese non-life market is soaring because of strong economic growth and supportive government policy. In 2017, total gross premiums written (GPW) grew to RMB 1 trillion (USD160 billion), a 13.8% increase over 2016. This expansion benefited from China’s gross domestic product growth of 6.9%, even amid increasing government efforts to deleverage corporate debt and reduce excess industrial capacity. While economic growth is forecast to remain at similar levels in the medium term, A.M. Best notes that these prospects could be dampened by elevated economic uncertainty from tensions on trade policies between China and its trade partners.

For the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=273171.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Christie Lee
Director, Analytics
+852 2827 3413
christie.lee@ambest.com
or
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
or
Jim Peavy
Director, Public Relations
+1 908 439-2200, ext. 5644
james.peavy@ambest.com

Contacts

A.M. Best
Christie Lee
Director, Analytics
+852 2827 3413
christie.lee@ambest.com
or
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
or
Jim Peavy
Director, Public Relations
+1 908 439-2200, ext. 5644
james.peavy@ambest.com