U.S.-China Crisis Seen Affecting Insurers

April 9, 2001

The ongoing crisis between the U.S. and China over the forced landing of a spy plane on Hainan Island and the death of the Chinese pilot who collided with it, continues to disrupt relations between the two countries. Commentators see it affecting China’s admission to the WTO and the implementation of accords giving U.S. insurers increased access to China’s insurance market.

The unspoken assumption is that China’s government may seek ways to “punish” the U.S. by causing problems for U.S. businesses who operate, or are seeking to operate in the country. Howard Margules, China president for Lincoln National told Reuters News Agency that, “Anytime there is political tension it’s going to impact potentially on us, the business community.”

The last big U.S- China crisis, the bombing of the Chinese Embassy in Belgrade, is often cited as one of the reasons American insurers, as opposed to European companies, have received few new licenses following PNTR agreement. “We try not to get dragged into the political squabble as much as we can,” Margules stated. He indicated, however that in China “insurance has always been very political.”

While all sides have said they want to solve the crisis; it’s so far at an impasse, as China refuses to release the 24 crew members and the plane, unless the U.S. accepts blame for the incident and issues an apology. The U.S. has rejected these demands. If the Chinese government decides to use the incident as an excuse to reject license applications, or to harass foreign insurers, it could have increasingly serious consequences.

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