Chinese life insurers’ credit exposure to defaults remains ‘key risk’

Written by Adam Cadle

19/04/2021

Chinese life insurers’ credit exposure to defaults “remains a key risk” with rising defaults in China’s credit markets occurring, according to Fitch Ratings.

“We anticipate their earnings will be increasingly sensitive to heightened capital-market volatilities, resulting in higher asset impairment,” it added.

Premium growth shows that China’s life sector is still fairly resilient and has picked up gradually in H2 2020 from H1, due mainly to the removal of social distancing measures and recovering market sentiment as the economy starts to normalise and with the fiscal deficit being scaled back. The life insurance industry was able to report premium growth of 6.9% in the challenging year of 2020, compared with 12.8% in 2019.

The weaker operating results of most life insurers were driven primarily by a combination of slower fundamental earnings expansion due to weaker new sales, lower rates and higher bases because of tax refunds the previous year.

Related Articles