CHINA’S NON-LIFE INSURANCE SEGMENT OUTLOOK REMAINS STABLE - AM BEST

KUALA LUMPUR, Nov 29 (Bernama) -- Global credit rating agency AM Best has maintained a stable outlook on China’s non-life insurance segment given the growth momentum in the motor and non-motor segments, as well as the domestic economic recovery following removal of pandemic-related restrictions, partially offset by a weaker 2024 economic outlook.

The rating agency’s “Market Segment Outlook: China Non-Life Insurance” report also notes the industry’s solvency position remains robust, albeit with higher capital requirements under China Risk-Oriented Solvency System (C-ROSS) Phase II.

According to AM Best in a statement, the recent relaxation of C-ROSS solvency-related investment rules is expected to boost the non-life segment’s solvency position slightly.

China’s non-life market posted a net profit of 44.5 billion Chinese yuan in the first nine months of 2023, down by 7.4 billion Chinese yuan from the same prior-year period, which was attributed to underwriting pressures and catastrophic events; the industry’s investment returns remain the main contributor to overall earnings.

At the same time, total direct premiums written rose by 7.3 per cent, to 1.2 trillion Chinese yuan (US$166.4 billion) in the first nine months of this year. The motor segment has shown strong growth momentum, with premiums expanding by 5.8 per cent in August and by 5.6 per cent in September, compared with the same periods last year. (US$1=RM4.64)

Another significant trend is the exponential growth in electric vehicle sales, which has led to rising demand for motor insurance.

Its senior financial analyst, Lucie Huang said: “While insurers are looking to tap into the opportunities offered by the electric vehicle segment, it should be noted that repair and servicing costs are higher than that of gas-powered vehicles due to expensive parts and a shortage of qualified repair and maintenance technicians.

“Moreover, the lack of claims history, combined with differences among electric vehicle manufacturers, poses a challenge to accurate pricing and risk assessments.”

According to the report, non-motor lines of business will likely be the main drivers of future premium growth, and AM Best expects that non-motor lines will fuel development of China’s non-life market over the medium term.

-- BERNAMA