On 17 June 2015 Australia and China entered into the China-Australia Free Trade Agreement (ChAFTA). The Australian Trade Commission describes ChAFTA as unlocking significant opportunities for Australia by increasing opportunities with Australia’s biggest trade partner, which is already worth almost $160 billion in total trade. Indeed, in 2013 China’s investment into Australia (in stocks) was valued at $31.9 billion making China the eighth biggest investor in Australia.
But what does this mean for the insurance industry?
ChAFTA allows Australian companies in the financial services industry new possibilities for investment and interaction with China. Unlike other jurisdictions with established and, in some cases stagnant, regulatory environments, China offers ground floor entry to new types of investment and risk. Life and non-life insurance, reinsurance and retrocession, and insurance brokerage are all defined financial services (ChAFTA, Annex 8-B).
In addition, financial service providers will be able to take advantage of the removal of minimum working capital rules in some circumstances and enjoy more asset management opportunities and access to Chinese investments. ChAFTA creates significant new opportunities that will be of interest and potential benefit to insurers.