China’s insurance industry has enjoyed robust growth in recent years. Total premium income, for example, rose 27.5% in 2016 to reach RMB 3.1 trillion (USD 490 billion), the strongest growth the industry has enjoyed since 2008. As well, by the end of 2016, total insurance industry assets stood at RMB 15.12 trillion (USD 2.39 trillion), a 22.3% increase from the start of the year.

Premium growth slowed in 2017 and 2018, due in large part to China Insurance Regulatory Commission (“CIRC”) and China Banking and Insurance Regulatory Commission (“CBIRC”) reforms aimed at universal life insurance. Nonetheless, the overall outlook for China is healthy and statistics for 2018 show that overall insurance premium income rose 3.92% from a year earlier to RMB 3.8 trillion (USD 562.52 billion). As the industry adjusts, premium income growth will likely accelerate. Indeed, Swiss Re Group forecasts that premium income will post annual growth of over 10% in the coming two years. Total insurance industry assets, as of the end of 2018, stood at RMB 18.33 trillion (USD 2.71 trillion), a 9.45% increase from the start of the year.

This report provides an overview of key developments in the PRC insurance industry in 2018 and explains their impact on foreign investors. It then moves on to an attempt to forecast regulatory trends in 2019 and beyond. It concludes with a discussion of some statistical highlights and key growth drivers of China’s insurance industry.


2018 was another watershed year for foreign insurers and intermediaries in China in that the Chinese government not only made a number of major reform announcements, but also began to follow through in many instances. The main 2018 reforms include:

  • a major liberalization of China’s rules governing foreign investment into the insurance industry;
  • the promulgation of requirements for collateral in cross-border reinsurance transactions in the context of a framework agreement for China–Hong Kong mutual solvency recognition;
  • the implementation of a wave of new regulations meant to address excessive risk and to redirect the industry towards long-term sustainable growth. This effort mainly involved an attempt to put China’s insurers on a sounder risk-management and solvency footing by implementing reforms designed to improve corporate governance, protect consumers, increase product selection and otherwise modernize the industry; and
  • a complete overhaul of China’s financial regulatory system, including the creation of a super regulator and the merger of the CIRC with China’s banking regulator to create the CBIRC as a single regulator for banks and insurance companies.

Below is a summary of the key contents included in the review.

Further Opening of the Market to Foreign Investment

Foreign insurance companies and foreign investors in China’s insurance sector, as well as foreign invested insurance intermediaries, will benefit from a number of changes such as the increase and then elimination of the foreign ownership cap in life insurance companies. These initiatives represent a significant opening of China’s insurance market to foreign investment. In the wake of these announcements, multiple foreign insurance companies have announced plans to enter, or expand their operations in, the PRC market. For instance, in May of 2018, FWD applied for a license for a majority foreign-owned life insurance joint venture. As well, in November 2018, Allianz received approval to establish China’s first foreign insurance holding company and AXA announced it would purchase the remaining 50% stake in its China joint venture, AXA Tianping. Prudential and Sun Life have also indicated their interest in increasing their holdings in their China operations.

HK-PRC Harmonization Developments in Reinsurance

On 16 May 2017, the CIRC concluded a framework agreement with the Office of the Commissioner of Insurance (“OCI”) to achieve mutual recognition that the solvency regimes of China and Hong Kong are equivalent (the “Framework Agreement”). Mutual equivalence recognition is meant to increase cooperation between the two regulators, provide regulatory and supervisory convenience, and prevent administrative overlap. Under the Framework Agreement, the CBIRC and the Hong Kong Insurance Authority, which has replaced the OCI, will complete an equivalence assessment of their solvency regimes within four years.

Following upon this, the CBIRC promulgated the Notice on Issuing the Solvency Regulatory Rules for Insurance Companies (“Notice 34”) on 2 July 2018. Notice 34 is the one of the first steps in the transition to mutual recognition of the two regimes. Essentially, it provides that, when a Chinese insurer cedes risk to a qualified Hong Kong reinsurer, a lower (vis-à-vis other foreign reinsurers) risk factor will apply and the capital requirement of the Chinese insurer will be reduced accordingly. This amounts to granting preferential treatment to Hong Kong reinsurers and Notice 34 will doubtless increase the prominence of Hong Kong reinsurers and brokers in China’s reinsurance sector.

Notice 34 and the Framework Agreement are best understood in the context of the Greater Bay Area Initiative, a much broader effort to economically integrate the Hong Kong and Macao Special Administrative Regions with the surrounding Chinese cities of the Pearl River Delta. This burgeoning mega-city will play a key role in the Belt Road Initiative and in its economy as a whole. Further integration of Hong Kong’s economy into the Greater Bay Area will likely provide additional opportunities for foreign insurers and insurance intermediaries to access China’s insurance market.

CIRC / CBIRC Industry Reforms

Throughout 2018, the CIRC/CBIRC and other authorities continued to implement the wave of reforms that they had initiated in 2017. These reforms are meant to address excessive risk and reorient China’s insurance industry towards long-term sustainable growth. The extraordinary chain of events that led up to this massive reform campaign and the key reforms enacted in 2018 as a result thereof are discussed in further detail in the full report, which can be downloaded here.

Overhaul of Financial Regulatory Bodies

Beginning in late 2017, the central government totally restructured China’s financial regulatory system. Its first step was to establish a super regulator, the Financial Stability Development Committee (the “FSDC”). On 13 March 2018, the National People’s Congress announced the merger of the China’s insurance and banking regulators to create the China Banking and Insurance Regulatory Commission, which will cede some powers to the People’s Bank of China and work under the supervision of the FSDC. This reorganization is meant to address the high systemic risk which has plagued China’s financial system in recent years and which many observers have linked to the fragmentary nature of its regulatory system.

Looking Forward to 2019

Many observers predict that premium income growth, which figured at 3.92% in 2017, will rapidly accelerate as insurers adjust to new economic and regulatory conditions. For instance, Swiss Re Group anticipate 10% premium income annual growth in 2019 and 2010. Beyond strong premium income growth, however, predictions are difficult. Though the Chinese central government and the CBIRC have made their plans and objectives very clear, it remains to be seen whether the China-US trade war, China’s economic slowdown or other factors will shift the industry’s direction. As discussed below, there are already signs that the central government is recalibrating its economic policy away from deleveraging and reform and towards stimulus. Ultimately, if the CBIRC’s can continue to advance its reform and liberalization agenda, we predict the emergence of an insurance industry that will be very hospitable to foreign investment and will see increased activity by foreign insurers and intermediaries.

Highlights of China’s Insurance Industry

China has considerable potential for insurance industry growth. By the end of 2017, its insurance penetration rate had reached a modest but respectable 4.42% (2.59% in life insurance and 1.83% in non-life). By comparison, Hong Kong and Taiwan have very high penetration rates of 15% and 16% respectively. Indeed, China has a massive USD 18 trillion “protection gap” that is projected to increase to USD 46 trillion by 2020. Given the rapid state of development and reform of China’s insurance industry, it is difficult to summarize current market conditions. In general terms, China’s insurance industry is still maturing and has significant room to grow. Foreign insurers’ market share is currently modest. However, new regulations, along with economic and social growth drivers, have created conditions that are conducive to their expansion.