AM Best maintains stable outlook for China’s non-life insurance sector

AM Best has maintained a stable outlook for China’s non-life insurance sector, pointing to factors like a supportive regulatory environment, increased awareness of health insurance, and growth potential in the electric vehicle insurance market.

The ratings agency notes that the sector’s solvency ratios under the China Risk-Oriented Solvency System (C-ROSS) stabilised in 2023 and the first half of 2024, following a decline in 2022.

In recent years, large Chinese insurers have raised funds by issuing capital supplementary bonds in the domestic debt market at favourable rates. AM Best sees this as credit-positive, expecting investor confidence and risk appetite to grow as the capital market expands.

Health insurance premiums have also grown significantly, driven mainly by high-deductible, high-limit medical reimbursement policies, often called “million-yuan policies.”

Insurers have introduced new products with enhanced coverage to meet evolving customer needs, including tailored protection for specific population groups and adjustments in claims payment structures.

James Chan, Director, Analytics at AM Best, stated, “China’s rapidly ageing population is driving significant demand for insurance, and these products have gained significant traction as they offer supplementary coverage for expensive medical procedures and treatments not fully covered by social medical insurance.”

The rapid growth in electric vehicle (EV) sales has boosted demand for EV motor insurance. While many insurers have been cautious due to higher claims costs and loss frequency, China’s regulator has allowed more flexibility to adjust rates based on individual risk profiles, encouraging more detailed risk assessments.

Christie Lee, Senior Director, Head of Analytics at AM Best, commented, “AM Best expects large insurers to maintain their competitive advantage by leveraging more-abundant data, greater bargaining power in distribution networks and advanced actuarial analytics for more-accurate pricing and risk differentiation.”

However, China’s economic growth remains slow, with consumer demand weakened by a continuing real estate slump. A prolonged slowdown could reduce demand for insurance products tied to economic growth, such as motor, property, and engineering insurance.

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.