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European firms launch JVs to tap into growing assets in China insurance market

2020-01-09 17:50 Thursday

Ambitious insurers from Europe are increasingly partnering with an unusual range of Chinese companies, such as food manufacturers and retailers, with the aim of breaking into the country's growing insurance market, according to the latest reports.

China is already the world's number two insurance market after the United States and is projected to triple in size over the next 10 years.


For example, Ergo, which is a subsidiary of Germany's Munich Re Group, created a joint venture with carmaker Great Wall Motor at the end of 2019 so that it could sell policies to auto buyers as well as the Chinese firm's suppliers and staff.

In a similar move, Allianz, a Germany-based rival, sold a 30 percent stake in its local property and casualty business last year to e-retailer JD.com for a whopping 483m yuan (U.S.$ 68.7m).

Experts say it has become common globally for insurers to offer their services as an add-on to other firms' standard goods and services. Because Chinese e-commerce platforms oversee huge numbers of customers, the potential for partnerships is particularly lucrative, even if only a very small fraction buy insurance this way.

European insurers, by easing into various niches in the Chinese market, such as insurance asset management, through such partnerships, are getting ready to obtain the regulatory approval that will allow them to go it alone when the time comes.

Allianz had previously formed a JV with CITIC Trust, a subsidiary of state-owned investment firm CITIC. That enabled Allianz to sell life insurance in the country. They also struck a similar deal with China Pacific Insurance Group to sell health insurance.

In November, Allianz finally earned approval from the China Banking and Insurance Regulatory Commission (CBIRC) to start operating the first fully foreign-owned insurance holding company in the Middle Kingdom.

Elsewhere, AXA, the French company, received CBIRC approval for a buyout from the shareholders of auto insurance affiliate AXA Tianping. AXA was among the 1st insurers from Europe to secure a Chinese partner from outside the insurance business. It collaborated with state-run trading company China Minmetals to set up a life insurance VJ some 21 years ago.

Meanwhile, Italy's Generali, has sustained its own life insurance VJ with China National Petroleum over the last few years. Aegon, a Dutch insurer, also now sells life policies via a pair-up with software firm Tsinghua Tongfang after it took the place of original partner five years ago. Adding to the list, the UK's Prudential runs its own venture as well with CITIC.

The recent rush of action has been motivated in large part by active measures put in place by China to lower the barrier of entry for overseas insurers. Previously, such companies were required to show a thirty-year track record in their domestic market, have at least U.S.$ 200m in assets. They also had to commit to the establishment of at least 2 representative offices in China.

Forecasters expect China's insurance market to grow in value in fourteen years to U.S.$ 2.36tr. Across the first nine months of 2019, profits within the industry rose 122.7 percent to around 280 billion yuan, according to press reports.

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