NU Online News Service, Sept. 18, 2:35 p.m. ? Washington
Insurance groups are praising China’s imminent accession to the World Trade Organization as opening up a potentially vast new market for insurance firms.
The comments came after U.S. trade negotiators, Chinese government officials and WTO members resolved several disputes that had held up China’s WTO entry.
A final vote on China’s WTO membership could come in November.
“This is a win-win-win outcome for U.S. insurers, our international industry counterparts and Chinese consumers, who will enjoy a wider array of financial protection and retirement security products at competitive prices,” says Brad Smith, managing director of international relations for the Washington-based American Council of Life Insurers.
“AIA applauds the efforts of the U.S. Trade Representative’s office in favorably resolving all of the contentious and outstanding insurance issues that remained,” adds John Savercool, vice president of federal affairs with the Washington-based American Insurance Association.
In particular, Savercool notes, China agreed to begin phasing out a mandatory reinsurance cession to a government-run reinsurer and to broaden the types of commercial insurance that foreign companies can underwrite.
For life insurers, Smith says, China represents a vast market both in terms of population and the individual savings rate.
Currently, he notes, life insurers are limited to individual life insurance products. Despite this restriction, he says, the growth rate in China is 30% annually in premium volume.
But over time, Smith says, life insurers will be able to underwrite group products, pensions and health insurance, essentially a full array of retirement security products.
Smith adds that the major restriction for life insurers in the China agreement is that foreign companies are limited to 50% joint ventures with Chinese partners.
While this sounds bad, he says, it is not as severe as other restrictions among WTO members. For example, Smith says, India limits foreign life insurers to 26% equity in joint ventures with local partners.
Savercool notes that once China enters the WTO, it will receive permanent normal trade relations status with the U.S. In the past, he says, Congress has had to reauthorize normal trade relations status for China annually.