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China will lower the entry threshold next year for foreign insurance brokers as the country pries open the domestic industry in line with commitments it made upon joining the World Trade Organization in 2001.
The government would slash by half the capital requirement for setting up insurance brokers to five million yuan (US$604,200) starting Jan. 1, according to new rules published Friday by the China Insurance Regulatory Commission.
The new rules will replace old ones in effect since 2002. They will cover foreign firms as well as domestic companies that may wish to set up broking operations.
The government has so far granted approval to a handful of foreign insurance brokers, including a Shanghai-based venture half-owned by Willis Group Holdings, the world's third-largest insurance broker.
Bigger rivals such as Aon Corp. or Marsh & McLennan Cos. are eager to tap the nation's US$1.4 trillion in personal savings as the government dismantles cradle-to-grave welfare.
"The new rules aim to standardize the operations of insurance brokers, maintain fair competition and promote the development of the industry," the commission said.
"Foreign-invested insurance brokers are subject to the same regulations."
From this month, China has allowed foreign insurers to operate anywhere in the country, opening a fast-growing sector to wider international competition. China has also allowed foreign companies to offer health and group insurance and also set up insurance businesses related to pensions and corporate annuities.
Foreign insurance brokers can now own up to 51 percent of joint ventures, from 50 percent previously.
Foreign players, such as American International Group Inc., the world's largest insurance company, and Canada's Manulife Financial Corp., have lobbied hard for greater access.
Although the modern insurance industry has only about a dozen years' history in China, premiums have ballooned. They rose 13.7 percent in the first 10 months of 2004 alone to more than US$40 billion.
Among Friday's new provisions, brokers would be allowed in exchange for the five million yuan in paid-in capital to set up a maximum of three branches in a single province, municipality or region, one year after establishing a headquarters in China.
Companies that want to establish branches outside those areas must contribute another one million yuan in paid-up capital.
Those brokers with paid-up capital of more than 20 million yuan would not be asked for more.
The new rules retain a number of previous provisions - including one that stipulates that brokers that had not conducted business for six months would have their licences revoked.
(Shenzhen Daily December 27, 2004)
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