China: At least 51 listed companies apply to form insurers

Source: eDaily | 30 Sep 2016

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At least 51 corporations listed on the Shanghai and Shenzhen stock exchanges have applied to the insurance regulator, CIRC, to establish insurance start-ups.

Among the listed wannabe founding investors, 16 are  software and ICT companies and six are real estate development corporations, according to an analysis carried out by Shanghai-based The Paper. The others hail from a wide cross-section of other industries including warehousing and garment manufacturing.

Many of the listed companies plan to team up with unlisted companies to form insurance joint ventures. Including the prospective unlisted partners, the total number of businesses keen on entering the insurance market is at least 200.

This year to date, CIRC has already given the green light for  the establishment of 15 new insurance companies and rejected four applications.

For the whole of last year, 11 new insurers were approved. They are backed by more than 70 companies.

Belief that clinching an insurance licence 'guarantees' money making

"Profits of insurers are much higher than that in many sectors. Getting an insurance licence is like securing a guaranteed profit. An insurer can raise funds easily by selling insurance at a cost much lower than many other fundraising channels. It is not a secret that an insurance company serves like a deep pocket from which companies can easily draw funds," Yang Di, a researcher with Shanghai Shenda Asset Management, told China Daily.

According to CIRC data, the total assets of China's insurance industry more than doubled from CNY5 trillion (US$750 billion) in 2010 to CNY12 trillion in 2015. In the first half of 2016, life insurance premiums reached CNY1.176 trillion, a surge of 50%  year-on-year, and non-life premiums reached CNY463.2 billion, representing year-on-year growth of 8.5%.

Ding Wentao, a researcher with Sinolink Securities, said: "We estimate that the fast growth of premium income will last for another decade. Internet-based sales channels, and the growing number of niche markets will provide more opportunities for the newcomers.”

However, CIRC has warned that insurance licences should not be regarded as a key to access to low-cost funds and that insurance companies are not to be treated as ATMs by their shareholders.

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