A noted Chinese insurance expert is calling for the establishment of more Chinese reinsurance companies to boost competition in the reinsurance market.

 

A reinsurance company is one paid by an insurance company to assume the risks of the later's policies. The only reinsurance company in China now is China Reinsurance Group.

 

China's reinsurance market is now open to foreign investors in the insurance industry and the world's biggest reinsurers -- Swiss Re, Cologne Re and Munich Re, and Lloyd's have all established reinsurance operations in China, and in addition, nine foreign reinsurers opened 12 representative offices in the country.

 

Foreign reinsurers focus on the high-end market and clients whose practices are in compliance with international standards rather than the medium-and low-end market.

 

Hao Yansu, director of the insurance department in the elite Central University of Finance and Economics, said, "to liken the reinsurance market as a cake with high end as cream and medium and low end as flour, foreign reinsurers favor the cream. But the flour also needs to be eaten. Obviously, one local reinsurer can't satisfy the requirements of the country's reinsurance market."

 

Reinsurers from overseas bring advanced products and services. However, their products do not necessarily cater to China as the country is vast and unbalanced in its economic growth, acknowledged Hao.

 

The high-end reinsurance market is fiercely competitive. Big companies such as the China Minmetals Corporation and China Ocean Shipping Group participate in the choice of their reinsurers when they decide who's going to be their insurer.

 

With only one local reinsurance company, small insurers find themselves difficult in finding reinsurers, which hinder their growth and risk management.

 

Fast growth in the insurance market has spurred the need for reinsurance. As of March this year, China has 93 insurers with 12 new insurers set in 2005. Many of them are limited in assets and weak in product development and risk management.

 

Liu Jingsheng, general manager of China Reinsurance Group, said that the insurance regulator should give priority to the development of reinsurance market.

 

(Xinhua News Agency May 11, 2006)