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China flings open insurance sector after WTO

New World Trade Organisation member China has wasted little time prying open its tightly held insurance sector in the two days since joining the global trade body, with a flurry of foreign firms announcing new licenses and expansions.

US insurers Metlife and New York Life and Japan's Nippon Life Insurance Co announced they were given the go ahead to start operations Tuesday -- the day China's 15-year quest ended in membership of the WTO.

The China venture of Canada's Manulife said on Wednesday it had been given a green light to set up a second branch, while Japan's Marine & Fire and Mitsui Sumitomo also received approval to set up branches.

For years, the China Insurance Regulatory Commission doled out critical licenses at a snail's pace and had been even slower to approve choices of location, partners and products -- even after a license had been given.

But foreign insurers expect an easier time getting licensed to sell policies with China in the WTO and had begun queuing up even before it finally entered the global trade body for a crack at the market now dominated by Chinese firms.

Domestic insurers, which hold 99 per cent share of the market, will now face stiff competition from overseas firms eager for a crack at the rapidly growing market.

''China is recognised by the international insurance industry as the largest potential market in the world,'' said William J Toppeta, president international operations for Metlife.

''Metlife is optimistic about the growth potential of the country and looks forward to helping to develop the insurance market in China,'' he said in a statement.

Nippon life said it aimed to become the first Japanese insurer to sell policies a market it estimated as worth nearly $12 billion and growing at 15 per cent annually.

Now the tough part would be finding a Chinese partner, said a spokesman at Nippon Life, Japan's largest insurer.

Under its WTO commitments, china will allow ''effective management control'' in life insurance joint ventures, although it will cap foreign stakes to 50 per cent.

It will also phase out geographical restrictions in three years, allow foreign insurers into group, health and pensions over five years and permit wholly owned non-life subsidiaries in two years.

Metlife, a subsidiary of the top US life insurer Metlife Inc, planned to focus initially on sales of individual policies in China, the latest step in its strategic expansion. Metlife moved into Chile earlier this month and into India in August.

Other firms with a toehold in china already said they had been given approval to expand.

Manulife-Sinochem, in which Canada's top insurer Manulife holds a 51 per cent stake, said China would allow it to set up a branch office in the southern city of Guangzhou and hoped to begin selling policies there soon.

''It will be a smooth process all the way through, but it's impossible to know exactly when we'll begin our business,'' Bonny Hu, Manulife-Sinochem's senior marketing manager said.

Manulife-Sinochem has been operating in Shanghai since 1996 and employs 3,200 agents serving more than 100,000 customers.

''The approval to begin preparation of a branch office in Guangzhou is the first step in implementing our strategy of becoming a national insurer in China,'' said Marc Sterling, Manulife-Sinochem's vice president of regional operations, Asia.

The flurry of licensing activity followed reports that China had resolved a dispute over the status of American International Group Inc, the first foreign insurer allowed into the China market and the only one allowed 100 per cent life insurance companies in the country.

China had awarded AIG four insurance licenses and would let it establish, operate and own insurance operations in the cities of Beijing, Suzhou, Dongguan, and Jiangmen, the Wall Street Journal reported.

In return, the US-based insurance giant would have to operate future businesses as 50-50 joint ventures with a Chinese partner. AIG had previously argued it should be allowed full ownership of future and existing ventures.

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