Insurers to focus on quality not quantity
By Zhang Fengming |
April 15, 2010, Thursday
|
Print Edition
Print Edition
CHINA'S life insurers will shift toward ensuring product quality rather than quantity - a key theme for the sector in 2010, 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, associate director of financial institutions at the global rating agency.
Insurers are allowed to expand their investment channels such as infrastructure from the traditional bonds and bank deposits.
Economists expected China to raise its benchmark interest rates in the second quarter of this year though an imminent rate hike is unlikely with a fall in credit in March.
Banks in China extended a smaller-than-expected 510.7 billion yuan (US$74.8 billion) of yuan-backed credit last month, down from February's 700 billion yuan. The monthly new credit has fallen for two straight months this year, indicating the government's control on lending growth is bearing fruit.
Meanwhile, the rating firm took a more cautious view of China's non-life insurance sector. Despite robust growth over the past few years, competition within the sector has led to a price war. Larger insurers lost market share to newer and smaller competitors.
Propelled by the stock market, Chinese insurers improved their investment returns last year. They reaped a total of 214.2 billion yuan from investments in 2009, a yield of 6.41 percent - 4.5 percentage points higher than in 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, associate director of financial institutions at the global rating agency.
Insurers are allowed to expand their investment channels such as infrastructure from the traditional bonds and bank deposits.
Economists expected China to raise its benchmark interest rates in the second quarter of this year though an imminent rate hike is unlikely with a fall in credit in March.
Banks in China extended a smaller-than-expected 510.7 billion yuan (US$74.8 billion) of yuan-backed credit last month, down from February's 700 billion yuan. The monthly new credit has fallen for two straight months this year, indicating the government's control on lending growth is bearing fruit.
Meanwhile, the rating firm took a more cautious view of China's non-life insurance sector. Despite robust growth over the past few years, competition within the sector has led to a price war. Larger insurers lost market share to newer and smaller competitors.
Propelled by the stock market, Chinese insurers improved their investment returns last year. They reaped a total of 214.2 billion yuan from investments in 2009, a yield of 6.41 percent - 4.5 percentage points higher than in 2008.
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