Recent moves have confirmed the reality of the expanding Chinese insurance market. They include an agreement between U.S. and Chinese regulators to share information; an announcement that AIG has been granted a first ever insurance license for China’s capital, Beijing, and a visit to the U.S. by the head of the country’s largest P/C insurer, who’s looking for investors.
The memorandum of understanding (MOU) signed Saturday in Kansas City, Mo. by the National Association of Insurance Commissioners (NAIC) and a delegation from the China Insurance Regulatory Commission (CIRC), recognizes “the increasing global nature of insurance markets and the need for mutual cooperation among international regulators,” said the NAIC.
NAIC and CIRC agreed to work together and to exchange information on “insurance regulatory issues and educational initiatives of mutual interest to the two countries.” NAIC President and Iowa Insurance Commissioner Terri Vaughan stated that, “In today’s global economy, it’s essential to foster open communication among regulators and encourage cooperation on matters of common interest. The purpose of this MOU is to help insurance regulators maintain efficient, fair, safe and stable insurance markets in China and the United States for the benefit and protection of policyholders.”
The NAIC indicated that under the agreement’s terms the next step is to “establish an Insurance Working Group” which will improve relations between insurance regulators in the U.S. and China and will “focus on specific regulatory issues of mutual interest.” It also provides a “framework for cooperation, the exchange of information and technical assistance to the extent permitted by applicable laws, regulations and requirements.”
On Wednesday AIG announced that its “100 percent owned” Chinese subsidiary, American International Assurance Company, Ltd. (AIA) has received authorization to open a Beijing life insurance operation, the first time a foreign insurer has been given a license to do business in China’s capital city.
AIG was the first company to reenter the Chinese market when it set up an office in Shanghai in 1992. It’s also the only foreign insurer with wholly owned Chinese subsidiaries, a situation which held up China’s accession to the World Trade organization for some months,as European negotiators sought changes to eliminate what they felt was an unfair trade advantage. AIG agreed to limit, but not eliminate the number of wholly owned subsidiaries it operates in China.
AIG Chairman Maurice “Hank” Greenberg saw the move as an important step in expanding AIG’s leading position in the Chinese insurance and financial services market. “The continued growth of China’s economy and the resulting creation of a vibrant middle class in major cities such as Beijing offers great opportunity for AIG,” he commented in the company’s announcement.
If AIG is expanding in China, Tang Yunxiang, President of the People’s Insurance Company of China (PICC), which sells three-quarters of all the property insurance in the country, is looking westward. He’s in New York City to open the company’s first ever office in the U.S.
PICC is expected to be privatized within the next two or three years, and according to a report from Reuters News Agency Tang’s arrival in the Big Apple was warmly welcomed by about 150 U.S. insurance firm representatives representatives. While plans do call for privatization, it will apparently be on a limited scale with the Chinese government maintaining majority control.
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