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Bright year ahead for life insurers
By Zhang Fengming |
April 14, 2010, Wednesday
|
Online Edition
Online Edition
CHINA'S life insurers will shift towards ensuring product quality rather than quantity - a key theme for the sector in 2010, lending support to their credit profile, Fitch Ratings said yesterday.
"The potential of new investment channels, interest rate increases, and an increased regulatory focus on solvency, will be positive for China's life insurance sector in 2010," said Joyce Huang, Fitch Ratings' associate director of financial institutions.
Insurers are now allowed to expand their investment channels into areas such as infrastructure, as well as traditional bonds and bank deposits.
Economists expect China to raise its benchmark interest rates in the second quarter of this year though an imminent rate hike is unlikely.
Banks in China extended a smaller-than-expected 510.7 billion yuan (US$74.8 billion) of yuan-backed credit in March, down from February's 700 billion yuan.
Monthly new credit amounts have dropped for two straight months this year, indicating that the government's control on lending growth is bearing fruit.
Meanwhile, the rating firm takes a slightly more cautious view on China's non-life insurance sector. Despite robust growth over the past few years, competition has led to a fierce price war. Larger insurers have lost market share to newer and smaller domestic competitors.
Propelled by China's stock market, Chinese insurers improved their investment returns last year.
Insurers reaped a total of 214.2 billion yuan from their investments in 2009, or a yield of 6.41 percent. The yield was 4.5 percentage points higher than 2008.
"The potential of new investment channels, interest rate increases, and an increased regulatory focus on solvency, will be positive for China's life insurance sector in 2010," said Joyce Huang, Fitch Ratings' associate director of financial institutions.
Insurers are now allowed to expand their investment channels into areas such as infrastructure, as well as traditional bonds and bank deposits.
Economists expect China to raise its benchmark interest rates in the second quarter of this year though an imminent rate hike is unlikely.
Banks in China extended a smaller-than-expected 510.7 billion yuan (US$74.8 billion) of yuan-backed credit in March, down from February's 700 billion yuan.
Monthly new credit amounts have dropped for two straight months this year, indicating that the government's control on lending growth is bearing fruit.
Meanwhile, the rating firm takes a slightly more cautious view on China's non-life insurance sector. Despite robust growth over the past few years, competition has led to a fierce price war. Larger insurers have lost market share to newer and smaller domestic competitors.
Propelled by China's stock market, Chinese insurers improved their investment returns last year.
Insurers reaped a total of 214.2 billion yuan from their investments in 2009, or a yield of 6.41 percent. The yield was 4.5 percentage points higher than 2008.
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