The China-Australia Free Trade Agreement (ChAFTA) secures a range of unprecedented financial services commitments from China.
These commitments represent the most substantial market access commitments China has agreed with any FTA partner (other than in its agreements with Hong Kong and Macau) and create new commercial opportunities for Australian insurer, facilitating investment in both directions.
For the first time in an FTA, China has committed to allow Australian insurance providers access to China’s lucrative statutory third-party liability motor vehicle insurance market without form of establishment or equity restrictions. China has also undertaken to provide improved treatment on the establishment of internal branches of Australian insurers in China.
This should give a significant competitive edge to Australian insurers as they seek to participate in the sixth largest in the world, with direct written premium of US$253 billion in 2012. Distribution however remains a critical factor for international entrants who need to use improved technology to break the grip of the agency model.