China and India reshape reinsurance market

24-11-2016

The competitive landscape for reinsurance in China and India are changing significantly through the introduction of a new regulatory regime and the liberalisation of the market, said S&P Global Ratings.

In China, the new insurance regulatory regime and other government initiatives, combined with the sector's potential for growth, represent big opportunities for the sector, according to the ratings agency.

"Three domestic reinsurers have won licenses to operate in China in the past year in what we believe is a trend that will ultimately change the landscape of the country's reinsurance sector," said S&P Global Ratings credit analyst Eunice Tan.

The new Chinese reinsurers are likely to remain domestically focused for now, but they do have regional or global growth ambitions.

China’s reinsurers are set to grow only hesitantly abroad and to enjoy the safety of home turf instead, helped by a supportive government, according to a report by Intelligent Insurer.

The key competitive advantages of Asian reinsurers such as local market knowledge or sharing the same language are not applicable when expanding abroad, AM Best noted in a September Global Reinsurance Segment Report.

“In the initial stage of growing abroad they will utilise reciprocal business, but the amount is limited,” said Moungmo Lee, managing director analytics Asia-Pacific at AM Best.

In contrast, in India, foreign reinsurers are queuing up for licenses to operate in India after the liberalisation of the market.

India’s regulator amended the Insurance Act 1938 in 2015, allowing foreign reinsurers to open branch offices in the country.

Reinsurers hoping to operate in India from 2017 include Munich Re, Swiss Re, SCOR Re, Hannover Re, RGA (Reinsurance Group of America) and Berkshire Hathaway’s reinsurance unit Gen Re, according to news reports.

SCOR intends to establish the branch office in India as soon as it receives R3 authorisation, and is expected to start underwriting business from April 1, 2017 renewals.

Lloyd’s of London is set to establish a branch in Mumbai in 2017 after having received approval from the Indian regulator in November, allowing it to provide onshore reinsurance service in India.

"We believe opportunities exist for foreign reinsurers with sophisticated product development and strong technical underwriting expertise that are willing to invest for the longer term," said S&P Global Ratings credit analyst Philip Chung in the report, ‘Reinsurers Flock To India Despite An Uneven Playing Field’.

In the shorter run, however, India won't be a walk in the park for foreign reinsurers, as the direct non-life insurance industry has been making underwriting losses for many years.


China, India, Asia Pacific, Reinsurance, Regulation, SCOR, Lloyd's, Munich Re, Swiss Re, Hannover Re, Eunice Tan, Moungmo Lee

Intelligent Insurer