Chubb Corp.’s license to do business in China has finally been approved after a lengthy delay . The Chinese originally agreed to issue licenses to Chubb and John Hancock in April of 1999, but tensions between the U.S. and China, exacerbated by the bombing of the Chinese embassy in Belgrade, held up final approval.
Following the successful conclusion of negotiations with the U.S. last November, which granted China PNTR status, it was expected that approvals would be given, but it’s still been a long wait.
The license is limited in scope. Initially Chubb has only received permission to open a branch office in Shanghai to offer non-life products to companies with foreign investors. However, China has agreed under the provisions of the PNTR agreement to further open its market to foreign insurers.
Chinese authorities have also promised to include more regions, and grant more licenses if, as expected, China is admitted to the World Trade Organization.
The real interest for Chubb is the long term opportunity presented by the Chinese market. “We think we can break even in six years,” Ian Lancaster, Sr.V.P. for China, told Reuters News Agency. He estimated that half of the 600 to 1000 companies with foreign investment are in the Shanghai area, and said Chubb hoped to have 5 percent of that market within the next three years.
Lancaster, who’s been working on getting a license for Chubb for seven years, told Reuters that he estimated that China’s non-life premiums would double in the next five years to $10 billion, and envisioned a $100 million market within 10 years.
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