Thu, Dec 26, 2002 - Page 11 News List

Cathay Life gets approval to set up in China

MANAGING RISK The Chinese insurance market has grown by an average 14 percent annually in the past three years, with the life-insurance business expanding 19 percent

BLOOMBERG , TAIPEI

Cathay Life Insurance Co (國泰人壽), Taiwan's biggest life insurer, received approval from the government to invest US$22.85 million in a branch in China, where it may become the first Taiwan financial company to sell products.

Cathay Life is the first insurer to get government approval to invest in China, the Investment Commission under the Ministry of Economic Affairs said in a statement.

"With the same Chinese cultural background, it will be easier for Taiwan's insurers to expand in China than other foreign insurers," said Aaron Wu, who manages about NT$1.5 billion (US$43 million) in stocks at ABN Amro Asset Management Taiwan Ltd.

"Still, it may take six years to seven years for a life insurer to become profitable in a new market."

Parent company Cathay Financial Holding Co (國泰金控) is preparing to expand in the world's most populous nation, which has 1.3 billion people.

The mainland insurance market has grown by an average 14 percent annually in the past three years, with the life-insurance business expanding 19 percent.

Cathay Life plans to sell policies in the southern city of Guangzhou. In September, Cathay Life said it held talks with several Chinese insurers to form a 400 million yuan (US$48 million) venture there. An outside insurer needs a local partner to operate in China.

Cathay Life still needs final approval from Chinese authorities.

According to Chinese rules, the threshold for foreign insurers to open a full-service branch are: they must be in the business for at least 30 years; they must own minimum assets of US$5 billion; and they must have maintained a representative office in China for at least two years.

Cathay Life has been operating a representative office in Beijing for almost two years.

A representative office can't sell policies.

"Of course, we hope to set up a branch as soon as possible, but it all depends on the mainland's process," Cathay spokesman Lee Chang-ken (李長庚) said.

Cathay Life can send apply to China in February, said Lee, who declined to say whether the company had narrowed its list of potential partners. He also declined to say whether talks may conclude in time to apply by February.

Earlier this month, Cathay Life received China's approval to set up another representative office in Chengdu, capital of the southwestern province of Sichuan, and property insurance affiliate, Cathay Century Insurance, is establishing a representative office in Shanghai.

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