KUALA LUMPUR, Dec 14 -- Global credit rating agency, AM Best is maintaining its negative market segment outlook on China’s non-life insurance segment, citing underwriting profitability that is under pressure amid market reform.
A new Best’s Market Segment Report, ‘Market Segment Outlook: China Non-Life Insurance’, states that pressure on premium growth and underwriting performance due to comprehensive reform of motor insurance; and, execution risks and negative profitability impact arising from expansion of non-motor lines are among key supporting factors for the negative outlook.
China’s non-life insurance market registered a year-over-year increase of 7.2 per cent in direct premium written (DPW) in the first 10 months of 2020, following a solid 10.7 per cent expansion in DPW last year.
Notably, this growth was steered by non-motor lines of business, particularly health, which grew by 35.8 per cent, agriculture (21.8 per cent), engineering (19.2 per cent) and liability (18.1 per cent).
The market’s largest business segment, motor, continued to grow, albeit at a slower rate and now makes up slightly less than 60 per cent as of October this year, versus over 70 per cent of industry DPW five years ago.
Credit and surety, historically a strong driver of growth among non-motor segments, was the only line of business to record a contraction in premiums, according to a statement.
With the regulator’s recent announcement of plans for a comprehensive reform of motor insurance, AM Best notes that the premium income and underwriting profitability of the motor segment is likely to come under pressure over the next 12-18 months.
Despite challenges from the economic impact of the pandemic and regulatory changes, China’s non-life insurance market capital adequacy remains solid, as evidenced by an industry average China Risk Oriented Solvency System ratio of over 270 per cent as of second quarter of 2020.
More details at www.ambest.com.
-- BERNAMA
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