Reinsurance in China: domestic companies dominate the market

Reinsurance is an economic instrument by which insurance companies transfer a part of the risks they have received from their clients to other insurance companies in exchange for a certain percentage of the insurance premium. Most often, this tool is used when a company takes on risks that are too big for it and can cause catastrophic losses, for example, when insuring spaceships or aircraft. Currently, reinsurance in China is showing a trend of hardening. The growth rate of insurance premiums has slowed down, but the structure of the industry’s insurance types continues to adjust, and the demand for reinsurance ceding by property insurance companies has increased. The growth rate of ceded insurance premiums has far exceeded the market level over the last couple years in China.

Data Source: GlobalData, Chinese Reinsurance industry

According to GlobalData statistics, the premium ceded in the reinsurance market in China will grow rather slow with a CAGR of 6.8% from 2019 to 2024 reaching 38 billion US$, amid proposed changes in its reinsurance regulatory policies. Namely, the China Banking and Insurance Regulatory Commission has proposed amendments to the rules of reinsurance, which are aimed at tightening the management and supervision of reinsurance activities. Six new rules require insurers, among other things, to create an independent reinsurance department at the head office and prohibit branches of insurers from carrying out reinsurance activities.

Legal aspects of reinsurance in China

From the perspective of its nature, reinsurance can be divided into statutory reinsurance and commercial reinsurance. Statutory reinsurance is a protection strategy used by some countries to expand the underwriting capacity of the domestic insurance market and reduce reinsurance reliance on foreign insurance companies. Singapore, South Korea, India, Egypt and other countries have all stipulated by law that certain or all insurance businesses underwritten by domestic insurance companies shall be reinsurance with designated domestic professional reinsurance companies in a certain proportion. China’s insurance law, which has been implemented since 1995, stipulates that all domestic property insurance companies shall handle 20% of the statutory reinsurance business with a Chinese Reinsurance Company.

What is reinsurance used for?

At present, the functions of reinsurance in China include:

  • accepting the ceding business of property insurance companies;
  • accepting the ceding business of life insurance companies;
  • accepting the statutory reinsurance business of domestic insurance companies with the approval of the China Insurance Regulatory Commission;
  • handling the reinsurance business;
  • operating International reinsurance

China Reinsurance Companies: the main player in the market

Listed since October 2015 on the Hong Kong Stock Exchange, China Reinsurance Group Corporation (China Re) is one of the largest reinsurance groups in China. In 2020, China Reinsurance Corporation had  46.5 billion yuan of life reinsurance premium and its net profit reached almost 6 billion yuan. It has a market share of nearly 80% in the domestic reinsurance market. In the future, China Re will introduce domestic and foreign strategic investors on the basis of maintaining the principle of absolute national control, and take the opportunity to realize the public offering of shares to further enhance its capital strength and underwriting capabilities. 

Data Source: Statista, designed by daxue consulting, Chinese Reinsurance Group Net Profit

At present, China Re Group has 6 holding subsidiaries, namely: China Property Reinsurance Co., China Life Reinsurance Co. , China Continent Property and Casualty Insurance Co. , China Re Asset Management Co. ,  and China Insurance Newspaper,  Huatai Insurance Brokers Co. Its business operations involve reinsurance, direct insurance, investment, media, insurance brokerage, education and training and other fields, forming a diversified and professional group operation structure and management pattern.

The business scope of China Re Group

The business scope of China Re includes:

  • Operation and management of statutory reinsurance business and unfulfilled responsibilities during the statutory reinsurance renewal period, and unfulfilled responsibilities of operating and managing commercial reinsurance business;
  • Invest in the establishment of insurance and reinsurance companies;
  • Operate and manage the capital application business permitted by national laws and regulations;
  • Operate policy-related businesses approved by the China Insurance Regulatory Commission and other businesses approved by relevant state departments;
  • Carry out group operation, manage company assets, and carry out capital operation.

Other key players in reinsurance in China

Currently, there are many reinsurance companies in China, such as French Reinsurance Beijing Branch, Swiss Reinsurance Beijing Branch, PICC Reinsurance, Taiping Reinsurance, Jiangtai Reinsurance Broker, China Reinsurance, China Life Reinsurance.

Jiangtai Reinsurance Brokers

Source: Jiang Tai Insurance Brokers Limited, logo

It was established in 2000 and is headquartered in Beijing. After 21 years of development, it has established branches across the country, providing consumers with disaster prevention, loss prevention or risk assessment, risk management consulting services, selection of insurers, and insurance procedures.
Taiping Reinsurance

Source: Taiping Reinsurance, logo

Taiping Reinsurance was established in 2015 with a registered capital of up to RMB 1 billion, providing users with commercial reinsurance services such as life insurance, property insurance, short-term health insurance and accident insurance. China Taiping Insurance Group Co is very powerful in collecting the “three major insurance licenses” of property insurance, life insurance and reinsurance.

PICC Reinsurance

Source: PICC, logo

PICC Reinsurance, established in 2016, is headquartered in Beijing. Like Taiping Insurance, it also has the three major insurance licenses of “property insurance, life insurance, and reinsurance”.
China Life Reinsurance

Source: China Re, logo

China Life Reinsurance was established in 2003 with a registered capital of up to 800 million yuan. China Life Reinsurance is a part of China Re Group and one of the leaders in the Chinese life reinsurance industry.

Key takeaways

  • The Chinese reinsurance market is experiencing a hardening trend due to stricter regulations from the government.
  • Domestic companies lead in the Chinese reinsurance industry and foreign companies have to comply with many requirements from the government, dampening potential foreign investment and competition.
  • Chine Re Group is the market leader, having the biggest share in the industry.

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