Allianz has become the first foreign insurer to have a wholly-owned insurance holding company in China, after officially opening the new company in Shanghai. It is likely to be followed by other foreign insurance players looking to enter or expand their presences in the country, following a relaxation of the regulations surrounding foreign ownership.
Allianz (China) Insurance Holding Company, which has a registered capital of Rmb2.7 billion ($389 million), officially opened in Shanghai on January 16. Its launch comes amid a thaw in trade tensions between the US and China, which could well encourage more foreign financial firms to enter the market.
The Munich-headquartered Allianz, which has assets of €1.96 trillion ($2.17 trillion) at the end of 2018, said the launch is part of an effort to penetrate China’s insurance market in a more efficient and dedicated fashion.
“China is one of the fastest growing economies in the world, strategically important for Allianz, and central to our growth strategy in Asia,” a company spokesman told AsianInvestor.
“China is one of the fastest growing economies in the world, strategically important for Allianz, and central to our growth strategy in Asia”
“Moving forwards, our strategy is to first bring our life company, followed by the property and casualty business and others, under the umbrella of the [holding company],” he added. “The holding company will provide a strong platform from which to develop our business in China, fast and effectively ... and position us to maximise the opening up of the Chinese economy.”
At present, the German insurer has two local insurance joint ventures in China – Allianz China Life and Allianz Jingdong General Insurance Company. The first is a joint partnership with Chinese investment manager Citic Trust, while the second is a property and casualty insurer jointly owned by Chinese ecommerce giant Jingdong, which was set up in 2018.
In addition, China-based Allianz Global Investors Asset Management will likely be overseen by the new holding company.
However, changes to the insurance rules in China last year now allow foreign insurers to fully own joint ventures. When asked whether Allianz would seek to acquire the stake in these JVs owned by its partners, the Allianz spokesman said the company is happy with the existing set up of the businesses.
However, he did not offer details of the group’s plans for Allianz China Life, beyond noting that “the partnership is resonating well with local customers and shows that Allianz can successfully sell insurance products through e-commerce channels in the country”.
MORE PLAYERS TO COME
Allianz’s launch of its new holding company comes at a time when China continues to open its markets to foreign investment, and as the trade war with US reaches a tentative armistice.
Beijing has repeatedly pledged to liberalise its financial markets as part of a reform plan to evolve its markets and attract foreign capital. And last July the State Council announced that life insurers and fund management company can become 100% owned by foreign firms as soon as this year, one year earlier than the previously scheduled.
The ability of foreign insurers to get directly controlled access is likely to prove very tempting. China is set to contribute the most to global life and non-life premium growth in 2020 and 2021, and its share of global premiums is predicted to reach 20% by 2029, up from around 11% in 2019, said the Swiss Re Institute in July last year.
China's share of global insurance premiums is predicted to reach 20% by 2029, up from around 11% in 2019
Allianz won the approval to set up its holding company in November 2018, and the China Banking and Insurance Regulatory Commission (CBIRC) said at that time that this was the start of “a new chapter in opening up the financial sector”.
No other foreign insurer has to date gained a similar approval to establish a local holding company. But Hong Kong-based insurer FWD took advantage of the spirit of liberalisation to apply for a licence to operate a majority-owned JV in China in May 2018. An FWD spokesman said the Hong Kong-based insurer is still waiting for regulatory approval of the application. Other foreign insurers such as Manulife and Prudential are also eyeing expansion opportunities in China.
Meanwhile, Standard Life Aberdeen is set to become the first foreign insurer to set up a dedicated unit to tap China’s corporate pensions market. Its subsidiary Heng An Standard Life (HASL) gained approval to establish a new pensions insurance company in March 2019. HASL has to complete the preparatory work by March 2020, within 12 months of the initial license being granted.
China’s pace of opening up the financial sector will likely become faster if US-China relations continue to improve.
The US-China phase I trade deal, signed on 15 January, should ease the ability of foreign financial institutions to set up majority-owned or wholly owned subsidiaries in China, rating agency Moody’s said in a note released on January 22.
The deal eliminates a number of entry barriers for US financial institutions and contains commitments to remove the foreign equity cap, discriminatory regulatory processes, and overly burdensome licensing and operating requirements in insurance, securities and futures, and fund and wealth management sectors in China as soon as April 2020, Moody’s noted.
China’s market liberalisation will mostly benefit financial institutions that view China as strategically important, because of the large market for financial services for its rapidly growing middle class, it added.
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*This story is updated to show that FWD applied for its licence to operate a majority-owned JV in China in May 2018.