Chinese motor sector draws global reinsurance giants

The world's two biggest reinsurers, Munich Re and Swiss Re, are tapping growth in China by helping domestic motor insurers write more insurance in the world's largest auto market, reports Bloomberg.

Premium income from China is expected to rise about 70% to EUR1.1 billion (US$1.6 billion) this year on demand for motor insurance, Mr Tobias Farny, CEO for Greater China and Southeast Asia at the world's biggest reinsurer, Munich Re, told the business wire agency in a recent interview. Reinsurance can help reduce the amount of capital that Chinese primary insurers need to support increasing demand for motor cover following a 32% jump in auto sales last year, says Munich Re.

Second ranking Swiss Re reported first-half Chinese premiums of more than US$1 billion compared with US$885 million for the whole of 2010. Its CEO, Mr Stefan Lippe, expects China to overtake the UK as the Zurich-headquartered company's second biggest market within 10 years.

"These are not hugely profitable contracts" because the large Chinese insurers have purchasing power, says Mr Stefan Schuermann, an analyst at Vontobel Holding in Zurich. "Pricing is just average, not more."

Profitability in China won't be a concern for the "near future", says Mr Farny. "What makes the Chinese motor insurance market less difficult than markets in Europe is that insurance rates in China are regulated, making the business profitable for primary insurers and therefore also for reinsurers," he adds. "We are ready to end contracts where our profitability requirements are not being met."