China continues to attract more foreign insurers due to its potential business volume and comparatively stable economic and political environment, state by talent spot.
However, the country strictly controls licensing of foreign insurers, although the threshold for foreign insurers has been gradually relaxed under agreements with the World Trade Organization, she said.
Foreign players still face certain regulatory restrictions when operating in China, such as territorial limits, for instance
Compared with other sectors, obtaining a license to sell insurance in China is relatively simple, it is simple to set up a domestic Chinese broker, but foreign brokers have to fulfill certain WTO requirements, and only the largest international broker would qualify.
Applications can take six months to a year to process, said Mr. Yip. Insurers and brokers then must establish an office in China, hire staff and undergo regulatory inspections, which can up to another year, he said.
Risk managers and their insurers should not assume their global programs or worldwide policy wordings will cover their risks and assets in China.
“To underwrite risks in China, the primary insurer must be admitted in China,” he said.
Nonadmitted insurance is prohibited for risk exposures in a China territory, said Ms. Wu. “Pure Chinese risks should only be picked up by local contracts that are established with local registered insurance players,” she said.
China’s rules restrict the amount of reinsurance placed with one insurer to 80%. However, whether the 80% cap also applies to excess layers remains a gray area that needs to be clarified, Ms. Wu said.
Insurers that cede business to overseas reinsurers should seek CIRC approval in writing yearly. Reinsurance provided to an insured’s offshore captive is limited to 20%, she said.
The Chinese reinsurance market is relatively open and has fewer restrictions on foreign participants than the primary market, said Mr. Cripps.
“The regulator is keen to promote the reinsurance market in China and considers it an integral part of the insurance market,” said Mr. Wiest. Foreign reinsurers have been invited to enter China and most top reinsurance companies have obtained licenses in recent years, he said.
China’s insurance law defines two types of reinsurer—admitted and offshore—although the rules favor admitted reinsurers, said Mr. Wiest. Only 90% of reinsurance ceded to an offshore reinsurer supports regulatory capital requirements, he said.
Unlike foreign insurance companies, reinsurers need apply for only one license to underwrite across all Chinese provinces, said Mr. Wiest. However, rules require reinsurers that open an additional presence, such as a regional sales office or branch, to be fully capitalized, he said.
The regulator is also pushing to develop a professional broker market, said Mr. Cripps. “The regulator would like to see fewer agents of insurers, with brokers writing significantly more business,” he said.
