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Going for the gold: China appears poised to lead South and East Asia''s push as the fastest-growing insurance market in the world. (Globalization: Cover Story).

Article Excerpt
Insurers are finding it tough to expand and turn a profit in most markets as 2003 gets under way. Investment losses from weak stock markets, regulatory uncertainty and prior-year losses such as asbestos continue to hamper growth in Europe, the United Kingdom and the United States. In Japan, a moribund economy with a sick banking sector at its core has created some uncertainty as to the health of some of the country's insurers.

Swiss Re Group, in its annual survey of the global insurance industry (Sigma No. 6, 2002), said a general downturn in the global economy has dampened demand for insurance products in many markets. "Adversely affected by developments in capital markets, results for both life and non-life insurance remain under pressure, and the available equity capital is shrinking," Swiss Re said.

There is one bright spot for the industry: China, which appears poised to lead South and East Asia's push as the fastest-growing insurance market in the world. Life insurance premiums in China grew by 47.4%, while nonlife premiums rose 8.7%, in 2001, according to Swiss Re. Worldwide, life premiums shrank by 1.8%, while nonlife premiums rose 5.4% in the same period. Insurance penetration is likely to continue at a rapid pace in China, as foreign insurers push for a chance to do business in the world's most populous market, Swiss Re said.

The only apparent obstacle to even more dramatic growth appears to be the slowness with which the regulatory regime has adjusted to market forces since China's accession to the World Trade Organization in December 2001. Daniel Riordan, executive vice president for emerging markets, Zurich North America, said foreign insurers see China as a challenging, but worthwhile environment. "There's been an opening up to foreign insurers that's been slow in coming. It has been one of the more closed markets for foreign companies, but there is the suspicion that it will expand, after China's entry into the WTO," he said.

China's much-heralded change in leadership at the top of the Communist Party, which took place in November, may have some impact on the country's tilt toward capitalism, but for many overseas insurers looking to do business there, the opportunities seem to be outrunning the government. In the overall economy," China is in some respects more capitalistic than the U.S.," said Riordan. "It's an amazing capitalist event to go into Beijing and see the development there--the construction and business being transacted."

Clarence Wong, Swiss Re Group's chief economist for the Asia-Pacific region, said the change in China's political leadership will not likely have an impact on...