Out-Law / Your Daily Need-To-Know

China announces plans to boost insurance industry

Out-Law News | 19 Aug 2014 | 10:56 am | 1 min. read

China’s state council (cabinet) has unveiled plans to develop the country’s insurance industry and raise premium incomes to 5% of gross domestic product (GDP) by 2020, according to the state-run Xinhua News Agency.

Xinhua said China’s government “wants to let the insurance industry play a bigger role” in the country’s fledgling social security network.

Under the government’s plans, which Xinhua said is the second package of its kind since 2006, China’s citizens could pay an average of 3,500 renminbi (CNY) ($565) per capita in premiums by 2020.

Xinhua said: “Commercial insurance will become the primary undertaker of individual and household programmes and an important supplier of corporate pensions and health insurance.”

The insurance industry will also be given “a bigger role in the prevention and relief of disasters and accidents” through the introduction of insurance products related to ‘catastrophic’ events, Xinhua said.

In addition, insurance funds will be encouraged to invest in bonds and equities to support major infrastructure projects, urban renewal and urbanisation.

According to Xinhua, the government will encourage take-up of the experimental ‘house-for-pension insurance’ scheme and launch a pilot programme to introduce compulsory insurance for environmental pollution, food safety, medical accidents and campus safety.

An analyst with China’s Guotai Junan Securities, Zhao Xianghuai, told Xinhua that the government’s plans “will open more space for China's insurance industry, which had a total assets worth CNY 9.4tn ($1.5tn) by the end of June this year”.

"The package has elevated the position of the insurance industry and created new room for development," Zhao said.

Chinese premier Li Keqiang said in July 2014 that the government would take “various steps to give more financing support to the real economy while keeping credit growth at a proper level”. Keqiang was speaking at a state council meeting which discussed the development of “a multi-level capital market and diversified insurance products”.