China’s insurance market to benefit from liberalisation

Written by Adam Cadle

31/03/2023

China’s insurance market is set to benefit from the liberalisation around foreign ownership on insurance asset management companies (IAMCs), Cerulli has said.

The removal of foreign ownership on IAMCs in September 2022 should pave the way for more of them to offer their expertise and strengthen their partnerships with other financial sector players, Cerulli argued.

The insurance sector was the earliest in China’s financial industry to open to foreign capital. This accelerated in 2018 when the upper limit on foreign ownership of life insurance companies was relaxed to 51%.

“In China, blue-ocean sectors such as private wealth management, pensions, and health provide fertile grounds for foreign insurers to offer their expertise, given the aging society. Insurance companies generally manage funds from pension products through fund management company (FMC) subsidiaries. However, IAMCs’ advantages in product portfolio creation and long-term duration can help overcome market fluctuations to some extent and help reap investment returns. Cerulli believes that IAMCs’ long-term fund management and diversified investments can help strengthen the private pension system,” Cerulli stated.

“IAMCs can also utilise their capabilities to strengthen their cooperation with other financial institutions. For example, IAMCs’ comprehensive risk management systems can strengthen traditional and non-standard investments. In addition, IAMCs’ strengths in alternative non-standard investments—such as debt and equity—and background in investment banking can provide a basis for partnerships in joint product development with FMCs, securities firms, and private fund managers.”

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