Taiping Life Insurance Co Ltd said Tuesday its pension subsidiary won regulatory approval to commence business, following six months of preparations.

Taiping Life, owned by China Insurance (Holdings) Co Ltd (CIH), is the local insurance industry's overseas flagship and the second to enter China's hugely promising business annuities market.

Ping An Insurance (Group) Company of China's pension subsidiary won approval for business from the China Insurance Regulatory Commission (CIRC) earlier this month.

"The establishment of China's first batch of specialized pension companies means Chinese enterprises are now able to set up occupational annuity plans through specialized pension operators," Taiping Life, which owns 60 per cent of the new Taiping Pension Co Ltd, said in a statement.

Taiping Pension holds 200 million yuan (US$24 million) in registered capital.

China's first regulations on business annuities became effective in May, laying the legal framework for an annuities system that encourages enterprises to set up pension funds for their employees, complemented by the employees' own contributions.

Although China's total business annuities stood at only 35 billion yuan (US$4.2 billion) at the end of last year, the number is expected to exceed 1 trillion yuan (US$120 billion) when the market becomes fully developed.

Financial companies including insurance firms are entitled to be custodian, asset manager and bookkeeper of such funds.

Foreign insurers were also allowed to provide annuity products earlier this month, as part of China's commitments upon its World Trade Organization accession. Many insurers have announced aggressive plans for the lucrative market.

"This is a market that everyone goes after, but it's no surprise that Taiping Life is among the first batch to enter," said Huang Huaming, an insurance professor at the University of International Business and Economics.

Although other financial firms such as banks are also allowed into the market, professional life insurers find themselves at a competitive advantage in such areas as human resources, management and actuarial expertise.

"Taiping Life excels with a combination of international experience and local presence," Huang said, citing the rich international experience of the company's shareholders and its three years of local operations.

European banking and insurance group Fortis, which has a leading position in Europe's pension market, owns a 24.9 per cent stake in Taiping Life.

Taiping's biggest shareholder, CIH, the overseas flagship of China's insurance industry, was founded in 1931 and is one of the nation's oldest insurers. It won regulatory approval three years ago to sell policies again on the Chinese mainland, through the subsidiaries Taiping Insurance and Taiping Life.

To back up the mainland operations, CIH's investors decided last month to recapitalize Taiping Life by another 800 million yuan (US$96 million), bringing its total capital to 2.3 billion yuan (US$277 million).

Taiping Life said earlier its premium income is expected to top 7 billion yuan (US$840 million) this year, nearly doubling from last year's 3.6 billion yuan (US$433 million), and that it was anticipating a further boost to premium growth from the new pension firm.

(China Daily December 22, 2004)