For many years, China was able to sustain exceptionally strong growth rates. From 2002 to 2011, China’s Gross Domestic Product (GDP) grew at an annual rate of more than ten percent. However, the country has recently experienced a much slower rate of growth of „only seven percent“, which, although by global standard exceptional, is the slowest expansion for China in more than two decades. The world considers this as a sign of impending global recession.
Some of the biggest issues are governmental policy decisions, along with a general lack of clarity and transparency. This uncertainty results in anxiety and confusion, which unsettles the financial markets. As China is still an emerging market, it has much to learn in terms of policy and law making, imbalances in distribution of wealth, environmental concerns, immigration, an aging population, citizen rights, corruption, health and safety and marketization issues, to name but a few. In addition to the worldwide economic slowdown and decline in global demand, political intransigence in some of the above mentioned areas could make progress in achieving its growth target even more difficult. Nevertheless, the insurance market seems to be intact and is still enjoying high growth rates. The question, however, is if this will continue in the future.
Robust premium growth despite economic slowdown
China has witnessed a significant increase in prosperity. The country’s GDP ranked number 150 in 1949; 60 years later, in 2009, it already surpassed Japan and became the second largest economy in the world. This increase in earnings, resulting from rapid industrialization, has created a burgeoning middle class and nurtured an insurance industry, which has grown at more than 15 percent per annum in the last 20 years. This has consequently given the industry a far louder voice in China’s economy than it ever had before. Measured by total market premium income, China became the world’s second largest insurance market in 2015 and the biggest in Asia (Gross Written Premiums of US-Dollar 390 bn, hereinafter referred to as GWP and bn respectively). This surpassed Japan (377 bn US-Dollar). It is considerably ahead of South Korea (174 bn US-Dollar) and Taiwan (96 bn US-Dollar). The China Insurance Regulatory Commission (CIRC) reports also showed annual growth rates of 13.4 percent from 2010 to 2015 and almost doubled the premium income within five years. Given the poor outlook for the Japanese economy, it is not unlikely that China…