China Foot Dragging Questioned by Senate, AIA

March 19, 2001

Thirteen members of the Senate Banking Committee recently expressed concern to trade representative Robert B. Zoellick that China may be attempting to back out of its commitments for compulsory reinsurance and large commercial risks.

This latest controversy, aimed at China’s eventually joining the World Trade Organization, evince the frustration on the part of the insurance industry and lawmakers over China’s failure to implement the undertakings it had agreed to when finally granted “Permanent Normal Trading Relationship” status last year. While similar undertakings with the European Community are being implemented, little progress has been made to give American insurers increased access to the Chinese market.

“It is crucial that China not be allowed to backtrack on insurance commitments it has made to the world,” said American Insurance Association Vice President John Savercool. “Unless China is held to the promises made in the U.S.-China bilateral negotiations in 1999, many U.S. property and casualty insurers will either be left out of the market entirely or have their access to the market significantly curtailed.”

In addition to the glacial pace of Chinese regulators in opening markets to foreign insurers, it now appears that China is “trying to define ‘large-scale commercial risks’ in a narrow enough way to limit opportunities for foreign insurers,” AIA said in a press release. It’s also backtracking on a commitment to eliminate a mandatory 20 percent cession of premium to the state run reinsurer China Re.

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