Interest rates and volatile equity markets make Chinese insurers wary

Tighter expense control and improving operating efficiency are likely to be the key priorities for Chinese life and non-life insurers amid consistently low interest rates and volatile equity markets, Fitch Ratings said in a non-rating commentary titled “Chinese Insurers Focus on Cost Control to Improve Margin” published in June. 

The life and non-life insurance sectors’ premiums rose by 12.5 percent and 5.1 percent year on year, respectively, in 1Q24 while their regulatory solvency positions were stable.

“We expect life insurers to have better new business value growth and margins in 2024, supported by regulations implemented in 2H23 and in early May this year to control insurance liability costs. 

“Insurers will strive to improve margins from bancassurance, which we believe is the key new business growth driver amid continued transformation of the agency channel. 

“We expect insurers to remain cautious on investment risk-taking.”

“Life insurers’ earnings remain more sensitive to equity-market performance compared with non-life insurers, given the scale of their exposures,” the report said.

The non-life sector’s growth slowed in 1Q24 on deceleration in the expansion of motor insurance, which accounted for 44 percent of sector premiums. Non-motor insurance remains the growth driver of non-life insurers, which have been diversifying their insurance books away from motor insurance. However, the underwriting margin of non-motor insurance hinges on insurers’ risk management and pricing sophistication. Losses from catastrophes will continue to challenge the underwriting stability of property, motor and agriculture insurance.

“We expect insurers to remain cautious on investment risk-taking due to volatility in capital markets,” Fitch said.

For more news from the East Asian Insurance Congress conference (EAIC) click here.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.