The insurance market in China will greatly benefit from the participation of Taiwanese insurers, who will strengthen its competitiveness should Chinese authorities agree to relax restrictions on overseas insurers, pundits said yesterday.
“Taiwan’s life insurance sector is far more developed than its Chinese counterpart in areas such as product innovation, management and channel distribution, as well as talent, and it could contribute greatly to the sector’s development in China,” Life Insurance Association (人壽保險公會) secretary-general Horng Tsang-nan (洪燦楠) said yesterday by phone.
It would be mutually beneficial to both countries if China fully opened its market to Taiwanese insurers, he said.
To keep a tab on foreign insurers, China has laid down thresholds that curb their expansion, including a required minimum of US$5 billion in working capital and a history of 30 years or more. It also imposes a two-year grace period before China-based liaison offices can be upgraded and become branches or subsidiaries. Together the measures are known as the “532” threshold.
That threshold has meant that most mid-sized Taiwanese insurers have not been able to enter the Chinese market, where premium incomes totaled 978.4 billion yuan (US$143.4 billion) last year, Chinese Insurance Regulatory Commission figures showed.
China also requires overseas insurers to seek to create joint ventures with Chinese partners and overseas firms cannot own more than a 50 percent. Only one Taiwanese non-life insurer and three Taiwanese life insurers — including Cathay Life Insurance (國泰人壽), which teamed up with Beijing’s state-run China Eastern Airlines Corp, (東方航空) and Shin Kong Life Insurance Co (新光人壽), which partnered with Hainan Airlines (海航集團) — have subsidiaries in China.
Horng said many Taiwanese insurers have expressed concern over the 50 percent stake threshold, which they believe would be a huge drag on future expansion should their Chinese partners refuse to inject more capital.
Financial Supervisory Commission Vice Chairwoman Lee Chi-chu (李紀珠) told a seminar on Thursday that the nation’s top regulator would attempt to persuade its Chinese counterpart to relax the 50 percent stake threshold.
The commission would also enter talks to attempt to persuade China to allow Taiwanese insurers to partner with more than one Chinese company and measures to relax China-bound property investments so that Taiwanese insurers could buy office buildings in China, she said.
The property investment relaxation would help cut rental costs for China-based Taiwanese insurers after industry leaders, including Cathay Life president Fate Chang (張發得), recently complained that they were suffering from surging office rental costs in Chinese cities such as Shanghai.
Horng yesterday advised the commission to prioritize the proposal to allow Taiwanese insurers to team up with more than one Chinese partner, as with that measure in place, the 50 percent stake threshold would be less of a problem.
But Warren Tseng (曾武仁), president of the Taiwan Insurance Institute (保發中心), yesterday warned that such a proposal may be wishful thinking.
“It will be a big call for China,” he said.
If China relaxes the restrictions on Taiwanese insurers, it would have to grant the same terms to other overseas insurers, which would be a big step for China and would further open up its markets to overseas businesses, he said.
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