Date
11 December 2016
China Life plans to expand its insurance business in Southeast Asia while increasing its investments in US and European markets. Photo: china.org.cn
China Life plans to expand its insurance business in Southeast Asia while increasing its investments in US and European markets. Photo: china.org.cn

Chinese insurers ramp up overseas expansion

Chinese insurance companies have benefited from government support to expand overseas.

The “Go out” strategy for insurance firms not only fits China’s overall economic strategy but also meets the development needs of the industry.

Seeking a stable return through a diversified global portfolio is expected to become a main strategy for insurance firms in the next five years.

China Life Insurance (02628.HK), for instance, has outlined two broad strategies.

The company has identified Southeast Asia as its top destination for expanding its insurance business. It opened its Singapore office in June 2015.

The Singapore unit will serve as a spring board for the insurer to access other southeastern insurance markets such as Indonesia, Malaysia and Thailand.

There are a number of reasons behind the decision.

First, the Southeast Asian insurance market boasts enormous growth potential, according to a report by A.M. Best Co.

The investment environment will further improve, along with regulatory frameworks.

Meanwhile, these countries have been heavily influenced by Chinese culture and they have maintained stable political relations with China.

Also, these are key countries along the Belt and Road routes, with promising economic prospects.

On the asset allocation side, China Life is targeting the US and Europe and actively seeking quality assets across different markets spanning bonds, real estate, funds and alternative investments.

Last year, Chinese firms spent US$106.8 billion in outbound acquisitions.

Of this, Chinese insurance firms accounted for 10 percent or US$10 billion. Up to 70 percent of deals by insurance companies are above US$1 billion, covering different parts of the world.

Yet, there is still a long way to go before China’s insurance industry can match its overseas counterparts in terms of financial strength and scale.

The sector accounts for less than 10 percent of all financial assets in the country. The ratio is 25 to 30 percent in developed countries.

This article appeared in the Hong Kong Economic Journal on Nov. 30

Translation by Julie Zhu

[Chinese version 中文版]

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