China's Insurance Market: Urgent! How to quickly respond to the impact of the foreign investment frenzy?

The insurance industry plays an indispensable role in the global financial landscape, and China's insurance market is attracting the attention of global capital with its huge growth potential and continuously optimized policy environment.

Since the beginning of this year, the pace of deployment of foreign insurance companies in the Chinese market has accelerated significantly. From the introduction of Allianz Investors as a strategic investor in the National Pension Insurance, to the formal transformation of Sino-Italian P&C Insurance from a Sino-foreign joint venture to a wholly foreign-owned P&C insurance company, and then to Prudential's acquisition of a 10% stake in Qianhai Reinsurance, a series of blockbuster transactions not only demonstrate the confidence of foreign investors in China's insurance market, but also indicate the gradual formation of a new pattern in the industry.

The entry of foreign institutions has undoubtedly injected new vitality into China's insurance industry, but at the same time, it has also brought more fierce market competition and challenges. In the face of such a situation, how China's insurance industry will respond and how to maintain its own development rhythm and strategic focus while absorbing the advanced experience and technology brought by foreign capital has become the focus of the industry.

Foreign investment "plus"

On June 24, the National Pension Insurance announced the introduction of Allianz Investment as a strategic investor, and the registered capital is planned to increase to 11.378 billion yuan. After the completion of the capital increase, Allianz Global Investors will hold a 2% stake in the National Pension Insurance.

This strategic investment demonstrates the confidence of foreign institutions in China's insurance market, and is also a microcosm of the active participation of foreign institutions in the development of China's insurance industry, and also marks a new milestone in the opening up of China's insurance industry.

In recent years, the release of policy dividends and the transformation of the insurance industry have made China's insurance market a sweet spot in the eyes of foreign institutions, and they have continuously increased their investment in China's insurance market through equity acquisitions and capital increases.

On June 4, Qianhai Reinsurance announced that 10% of the company's equity was won by Prudential International Insurance Holdings Co., Ltd., and then Prudential International transferred the above equity to Prudential Insurance Company of the United States. On May 20, Fujie planned to invest 1.075 billion yuan in Taiping Pension and obtain 10% of the equity of Taiping Pension; On May 15, the transfer of 51% of the equity of Zhongyi Property Insurance to Generali Group by CNPC Capital has been approved by the regulator, and Zhongyi Property Insurance has officially transformed from a Sino-foreign joint venture into a wholly foreign-owned property insurance company.

Lin Xianping, Secretary-General of the Institute of Culture and Creativity of Zhejiang University City College, said that the reason why foreign insurance companies have accelerated the pace of layout of China's insurance market is that China's insurance market has huge potential and broad development prospects; Second, in recent years, the regulator has also introduced a series of opening-up measures, gradually removing restrictions on foreign investment, significantly lowering the entry threshold for foreign investment, and providing a better development environment and opportunities for foreign-funded insurance companies.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, said that foreign insurance companies hope to expand their business scale, increase their market share and enhance their competitiveness through the layout of the Chinese market. At the same time, it can also use the resources of the Chinese market to expand its business areas and improve its brand influence.

Policy "Dongfeng"

Previously, there were strict restrictions on foreign investment entering the mainland's insurance industry. For example, a foreign-funded insurance company can only operate a property insurance company in China, and cannot set up a group company, a life insurance company or other business formats on a wholly-owned basis. A foreign insurance company applying for the establishment of a foreign-funded insurance company shall have been engaged in insurance business for more than 30 years and have established a representative office in China for more than 2 years.

However, since 2019, regulatory restrictions on foreign investment have begun to be relaxed, and documents such as the Notice on Clarifying the Timing of the Abolition of Restrictions on Foreign Equity Ratio in Joint Venture Life Insurance Companies and the Administrative Provisions on Insurance Asset Management Companies (Draft for Comments) have been issued successively to remove restrictions on the shareholding ratio of foreign shareholders in life insurance companies and insurance asset management companies.

At the beginning of this year, Xiao Yuanqi, deputy director of the State Administration of Financial Regulation, said at a press conference held by the State Council Information Office that the State Administration of Financial Supervision has abolished the restriction on the proportion of foreign shares, and foreign capital can hold 100% of the equity of banking and insurance institutions.

In addition, in March this year, the General Office of the State Council issued the "Action Plan for Solidly Promoting High-level Opening-up and Attracting and Utilizing Foreign Investment with Greater Efforts", which mentioned that it would deepen the opening up of commercial pension insurance, health insurance and other industries, and support qualified overseas professional insurance institutions to invest in the establishment or equity participation of insurance institutions in China.

With the continuous relaxation of policies, a number of internationally renowned insurance companies such as Angel in Germany, Prudential in the United States, and Manfort Reinsurance Company in Spain have increased their weight in China's insurance market by acquiring shares, establishing branches, and increasing capital.

Transformation challenges for local insurers

With the continuous increase in the proportion of foreign investment, the market competition is becoming more and more fierce. How to maintain the pace of development and strategic focus while absorbing the advanced experience and technology brought by foreign capital has become a common challenge for the industry.

While foreign insurance companies are riding the waves, local small and medium-sized insurance companies are facing a more complex situation. They need to find a new way to survive and develop in the onslaught of foreign investment. This requires small and medium-sized insurers to be more strategically astute and tactically sophisticated.

Some industry insiders said that small and medium-sized insurance companies need to look for new growth points from multiple perspectives.

First of all, small and medium-sized insurers need to consolidate and enhance their core competitiveness. Through product and service innovation, cost control and other means, we create unique market positioning and brand characteristics to stand out in the fierce market competition.

Second, digital transformation has become an inevitable choice for small and medium-sized insurers. With the help of big data, cloud computing, AI and other technological tools, improve operational efficiency, improve customer experience, and achieve precision marketing and customized services. This not only contributes to increased customer satisfaction, but also helps to reduce operating costs and increase profitability.

Finally, small and medium-sized insurers need to dig deeper into market segments that foreign investors may overlook. Segments such as professional insurance and rural insurance have great potential despite their relatively small scale. Small and medium-sized insurers can form local market advantages through in-depth research and precise positioning, which can be used as a new growth point.

All in all, the entry of foreign capital is an inevitable phenomenon in the globalization of China's insurance market, and it is also an important symbol of the maturity and diversification of the industry. For local insurers, this is both a test and an opportunity for transformation. In this magnificent market change, only by grasping the pulse of the times and insisting on innovation-driven can we stand tall in the wave of foreign investment and open up a new world of our own.

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