As Asia’s largest and the world’s second largest reinsurance market, China’s (re)insurance industry is expected to grow in the next years, driven by factors such as the country's expanding economy, rising insurance penetration rates, and increasing demand for risk transfer solutions. Insurance savings products have been on the rise and a smooth transition into IFRS17 has been reported in the country.
In 2017, China became the world’s second largest life insurance market, following an extended period of rapid growth, largely driven by its strong economic development.
However, in 2021, total life insurance premiums saw their first negative growth in a decade and the industry has been going through a period of transition, according to RGA's Jason Zhang.
"Mirroring the broader economy, the China life insurance market is going into a phase of transformation from relying on growth by brute force in sheer size and scale to increasing quality," Mr Zhang said.
"While this transition has proven to be difficult and painful at times, it is necessary and constructive for the long-term health and growth prospects of the industry."
The positive aspect to China’s life and health reinsurance sector in 2023 was the fact that reinsurers remained as the main force behind the underlying protection market, which typically generates higher margins and value than saving products.
"Reinsurers continued to support and enable insurers to tackle the protection market with new product ideas and underwriting innovations."
However, 2023 was also a unique year where there was a confluence of issues and events that disrupted business activities in the protection market.
Some industry estimates project new protection sales in 2023 are running roughly at one-third of that in 2022, which in turn slows down reinsurance new business momentum as well.
Product development trends
Insurance saving product sales have been strong in recent years in the China market, led by traditional fixed-rate products such as the increasing-sum-assured whole-of-life product.
"With declining interest rates and the recent reduction in the statutory pricing interest rate, we see a marginal shift from traditional fixed-rate products towards par and universal life products."
Protection product sales have been under significant pressure over the past few years with various challenges in place.
Going forward, the two main areas of focus for reviving the protection market are:
- Improving the cost effectiveness of protection product supply to meet the marginal protection demand on most of the population who have acquired some basic level of coverage but still have with a big protection gap.
- Enabling innovative and tailored protection concepts to bring out demand in blue ocean segments, such as the high proportion of impaired lives within Gen X or the young emerging middle class of Gen Y.
Marginal hardening of critical illness (CI) risk pricing
"Reinsurance terms have remained largely stable in the past few years, with some notable changes, including the marginal hardening of CI risk pricing given the deterioration of underlying loss trend, while medical risk pricing has softened materially due to stable and favorable underlying experience."