China’s marine insurance industry has slowed recently as the country’s economic problems, slower trade and increased competition have challenged premium growth. A new AM Best special report says that China’s insurance industry hopes that
China’s foreign economic development initiative will generate new sources of income’.
The report notes that, although cargo and hull accounted for just 1.3% and 0.7% respectively of China’s total property/casualty gross premium in 2014, that was still enough to make them the largest cargo insurance and the second-largest hull insurance markets in the world.
China’s “One Belt One Road” seeks to promote economic cooperation with Asia, Europe, Oceania and East Africa, encompassing over 60 countries.
AM Best notes that insurance penetration at most of these economic partners is currently less than 1%
AM Best said that Chinese insurance companies should create some innovative marine insurance products customized for these types of clients. But it was also important that China knew its markets, “to ensure prudent underwriting and adequate rates”.
The Chinese government is supporting the development of Shanghai as the marine insurance hub in China. It offers tax benefit incentives on marine cargo, air cargo, marine hull and marine liabilities, thus encouraging large marine insurers to centralize their marine business in the city.
Cargo gross premium in China in 2014 was CNY9.54bn ($1.44bn), 7.3% down on 2013. Hull gross premium in 2014 was CNY5.48bn ($830m), up 1.8% on 2013.
The hull market’s loss ratio in China has been trending upwards in recent years because of poor loss experience and premium rate reductions.
AM Best thinks that the Chinese government policies “could be catalysts for the transformation of the marine insurance industry for new premium sources”, but emphasized that “positive operating performance and long-term sustainable growth require adequate pricing, prudent underwriting practices, appropriate coverage terms and sufficient risk management”.
The Best’s Special Report, titled, “China Marine Insurance Withstands Challenging Operating Environment,” is at http://www3.ambest.com/bestweek/purchase.asp?record_code=254318.