China insurance industry eyes risk management as key to profitability
2017-04-10 23:07 GMT+84km to Beijing
By CGTN’s Cyrus Ip
Earnings season for Chinese insurance companies has just ended. Top insurers reported lower net profits due to the volatility of capital markets and continuing downward pressure on the RMB. Insurers say risk management is the key when it comes to profitability this year.
China Life, which enjoys the biggest market share in the life insurance market, reported that profits in 2016 were down almost 45 percent to 19.12 billion yuan (2.77 billion US dollars).
Other top players like People's Insurance Company of China (PICC), China Tai Ping, New China Life and China Pacific Life Insurance (CPIC) suffered similar problems. Risk management is the top focus for insurers this year.
Some insurers admitted they would switch to low-risk projects, while national plans, such as the Belt and Road Initiative, Public-Private Partnerships (PPP), reform of state-owned enterprises, will be closely monitored.
"We are interested in projects that have government support, or directly related to economic policy like the Belt and Road Initiative, because they have lower risks," said Ren Huichuan, the general manager for China Ping An Group.
Besides governmental projects, some insurers identified the Hong Kong stock market as another low-risk but high-attraction investment area, since the market is still in a value depression period.
"I think the value of the Hong Kong stock market is still attractive, we will plan to increase input to the Hong Kong market," New China Life’s president, Lee Quan, said.
Although the investment environment is not favorable for insurance companies, health insurance has begun to gain popularity and bring a silver lining to the industry. Numbers from China Life and New China Life show their health insurance business expanded by over 28 percent last year.
But Zheng Wei, an analyst from Peking University, warned that insurers should first address risk management, rather than seeking a fast return.
"Insurance is not just about money-saving and investment, it's the protection. The industry regulator has been adjusting the policy focus since last year, and hopes the insurance companies can balance between investing and protecting," Zheng stressed.
The China Insurance Regulatory Commission has been encouraging the industry to develop stable longer-term products, rather than high-risk short term products.