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November 15, 2013

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Home » Business » Biz Special

Overseas projects a boost for insurance companies

By Feng Jianmin | November 15, 2013, Friday | Print Edition

Robust economic growth in China has driven demand for property insurance to double-digit growth in the past decade.

In the first nine months of this year, property and casualty insurance premium income rose 15.8 percent from a year ago to 462.1 billion yuan (US$75.8 billion), according to China Insurance Regulatory Commission.

Though the industry is generally in good shape, analysts have been worried about declining margins and the impact from a slower economy.

Shanghai Daily caught up with AIG China President and CEO Eric Zheng to talk about market trends and the company’s strategy. The largest foreign property insurer in China in terms of premium income opened its sixth branch in Zhejiang Province last month.

Q: How has China’s property and casualty insurance market fared in the past year?

A: Some insurance demands are declining because of the economic situation while others are thriving.

AIG China’s business is much related to trade. As China’s exports slowed down amid global economic weakness, demand weakened for products such as product liability and logistics insurance.

The situation is not unique to our company but impacts the overall industry.

On the other hand, Chinese companies are taking up more construction projects overseas, and these activities all require insurance support.

One example is that of our client Shanghai Zhenhua Heavy Industries Co, which is building steel frame for a bridge in the US. The US requires a guarantee from an insurance company. Other examples including China companies building dams overseas. The growth of overseas projects supports insurance businesses.

In terms of consumer products, travel insurance recorded double-digit growth last year and was a highlight in our business.

Q: What’s your outlook for the Shanghai market?

A: Shanghai is AIG China’s largest market and the branch here contributes to about 40 percent of our revenue in China. Shanghai is aiming to become a financial and shipping center by 2020, and the newly launched free trade zone offers additional incentives. In terms of corporate business, demand for liability and logistics products will remain strong, and we are positive about financial insurance products. Previously, we offered only limited directors and officers liability insurance for listed companies in the US, and now we see more opportunities with Shanghai and China companies listed in Hong Kong. We are also talking with private and state-owned companies in Shanghai to promote merger and acquisition insurance. Risks are inevitable in their overseas expansion activities. Also travel insurance will continue to be in great demand.

Q: What benefits would you expect in the free trade zone?

A: If capital account liberating measures are taken, as the blueprint suggests, insurance companies may have wider investment options abroad and cross-border cash flows for the company will be easier. Also, authorities are studying preferential policies, such as tax incentives for shipping insurance products. That could be a boost for logistics-related insurance.

Q: Which markets will you prioritize in China?

A: Coastal areas could be our focus. Opening more branches in developed areas is essential and a regulatory requirement for us to tap the huge market. Challenges are not only gaining approval from regulators but also finding the right talent to run the new companies.

Besides adding branches, we will invest heavily in new branches in Zhejiang and Jiangsu provinces. We’ve been operating in Jiangsu for a year, but our business is small comparing with the size of economy in the province. A key mission is to promote our services in these areas.

 

Biz Special


 

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