Home > Resources > Industry > Financial Services > The Post-WTO Insurance Frenzy
The Post-WTO Insurance Frenzy


China’s insurance sector has registered 10 to 15 percent revenue growth for several consecutive years. Total income from premiums is likely to top US$20 billion in 2001.

By 2005, the total value of insurance premiums is expected to reach US$33.82 billion, constituting 2.3 percent of China’s total GDP. The average premium per person will be US$27.78.

Despite such rapid growth, the insurance industry is still a small part of the entire economy.  Compared with 11 percent in Japan and 8 percent in the United States, the insurance industry only represents less than 2 percent of China’s GDP.  It is no wonder that global insurance companies look to China as a driver for their industry’s growth over the next several years.

Laws and Regulations Governing Foreign Insurance Companies in China

Statutory Qualifications:

Foreign insurance companies that apply for establishment of foreign-invested insurance organizations in China should meet the following requirements:

  • Over 30 years of insurance business operation;
  • Total assets exceeding US$5 billion at the end of the year prior to the application; and
  • Has had a representative office in China for at least 2 years.

Capital Funds

The minimum registered capital required for a JV insurance company is listed as follow:

  • Not less than US$20 million for life insurance business;
  • Not less than US$20 million for non-life insurance business.

Guarantee Funds

  • 20% of the actual paid-up capital of a JV insurance company should be set aside as guarantee funds;
  • Foreign insurers setting up wholly owned branches in China need to deposit US$4 million with the government as required by the China Insurance Regulatory Commission (CIRC) as guarantee funds for either property insurance or life insurance operations.

China’s domestic insurers will face challenges as China opens the sector to foreign competition as stipulated by WTO accession agreements.

  • Most life insurance companies in the country have payout obligations that are significantly greater than their current return on investments
  • Shortages of actuaries and professional insurance management staff have contributed to poor business practices by insurance companies
  • Fear of international competition

In order to expand, domestic insurance companies need to standardize and rationally expand operations by offering new insurance products and by taking advantage of investment returns that are better than the world’s average.


In 1984, the State Council separated the state-run People’s Insurance Company of China Group (PICC) from the People’s Bank of China (PBOC) and offered standard insurance products such as life, property and reinsurance services. 

From 1984 until 1998, in order to create a more competitive domestic insurance market environment, China permitted more than 10 smaller Chinese domestic insurance companies to be established. The largest of these were Pingan Insurance Co and China Pacific Insurance Co, both providing comprehensive insurance services in all parts of China.

As a result of the WTO agreement on insurance with the U.S. and the E.U., Chinese officials have begun to restructure the domestic industry to build strength for the coming competition. Some of the steps so far have been taken:

  • Establishing more domestic insurance companies and permitting existing domestic insurance companies to operate in more cities;

  • Setting up alliances between domestic insurance companies and Chinese banks, starting with the largest insurance company, China Property Insurance Co, and the largest domestic state-owned bank, Industrial and Commercial Bank of China. Together they provide both insurance and other financial services to their customers. United States-based Prudential Insurance has teamed up with Everbright to form a joint fund management company;

  • Providing training programs to better permit Chinese insurance companies to compete with foreigners, to provide additional capable personnel for the insurance sector, and to hire foreign insurance professional as advisers. 

WTO Impact

Some changes will take place in China’s insurance industry under the WTO agreement:

  • China will permit foreign property and casualty firms to insure large-scale risks nationwide immediately upon accession;

  • China will expand the scope of activities for foreign insurers, which include group health and pensions;

  • China will allow 50 percent foreign ownership and remove joint-venture requirements on foreign life insurers, and phase out internal branching restrictions;

  • For non-life insurance, China will allow 51 percent foreign ownership upon accession to WTO.

Foreign Insurers: The Latest Moves


The Belgium-Dutch financial services provider bought a 24.9% interest in the Tai Ping Life (TPL).  Fortis paid US$88 million for the equity and will expand its share up to 49% or more, depending on the regulations China adopts under the WTO agreements. TPL has a national life insurance license for the whole of China and is part of the China Insurance Group. Fortis will be involved in the management of the new venture.

Swiss Reinsurance and Winterthur     

Swiss Reinsurance, the world’s second-largest reinsurance company, expects to be granted a reinsurance license early 2002. China does not allow any foreign reinsurance companies to operate, so Chinese insurers can sell their policies only to China Reinsurance – the only mainland reinsurance operator. Swiss Reinsurance will make Hong Kong its regional headquarters in year 2002 to manage its 15 offices in Asia, including China.

Winterthur Life & Pensions, the life insurance arm of the Credit Suisse Group, has chosen to participate in the China market in a different way. Instead of lining up to obtain a life insurance license, it has taken a 10 percent stake in the mainland’s fifth-largest life insurer – Tai Kang Life. Winterthur Life & Pensions will support Tai Kang through technical assistance in information technology, product development and training.


China has granted American International Group Inc. (AIG) four new licenses to set up and operate fully owned insurance operations in Beijing, Dongguan, Suzhou and Jiangmen.  AIG’s biggest advantage may be its new license in Beijing, a wealthy market where several other foreign companies have previously sought but been refused permission to operate.

MetLife, New York Life International and Manulife Financial

One day after China’s accession to the WTO, three licenses were issued to international insurers – MetLife, New York Life International (United States insurers) and Manulife Financial (Canada-based insurer) – allowing them to operate or expand in China.

The granting of three licenses in a single day may signal Beijing is prepared to speed up liberalization of the insurance market. Under its WTO agreements, China will grant more licenses to foreign insurers and open more cities to them. It will also allow them to sell products such as group life, pension and health policies, as well as their existing individual policies.

Initially, Shanghai, Guangzhou, Dalian, Foshan and Shenzhen will be open to foreign insurers. After three years China will issue nationwide licenses.