AM Best has maintained its stable outlook on China’s non-life insurance segment, citing improved regulatory oversight, new growth opportunities and ongoing digitalisation and innovation.

The Best’s Market Segment Report, “Market Segment Outlook: China Non-Life Insurance,” states that enhanced regulatory oversight, particularly for non-motor lines such as property and liability, is expected to support pricing discipline, strengthen distribution practices and promote prudent market conduct. Additionally, new growth opportunities are emerging from initiatives under the nation’s latest five-year plan that focuses on technology finance, green finance, inclusive finance, pension finance and digital finance, as well as the expanding Chinese Interest Abroad business, despite moderating GDP growth and a slowdown in traditional non-life business’ premium growth.

“For Chinese Interest Aboard business, while expansion may enhance China non-life insurers’ geographical diversification over time, it’s important to note that insurers could also be exposed to unfamiliar risks that require advanced underwriting skills and robust risk management systems to protect against large financial losses,” said Lucie Huang, associate director, analytics, AM Best.

The report states that China’s non-life segment’s bottom line has been driven by investment returns, with the industry’s underwriting margin thin amid intense competition. Although underwriting profits are largely concentrated among large insurers that benefit from economies of scale, some smaller local insurers have achieved favourable underwriting margins by focusing on niche market segments. At the same time, concerns have emerged about China’s economic momentum due to lower GDP growth forecasts. In turn, insurers are shifting focus from top-line growth to bottom-line protection and efficiency.

“The industry’s priorities are increasingly shifting toward sustainable profitability and operational efficiency, supported by accelerated digitalisation and innovation. Beyond traditional reinsurance support, they are also adopting proactive risk reduction measures to better manage exposures, while enhancing the client experience and improving post-disaster response,” said James Chan, director, analytics, AM Best.

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=368348.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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