Reports says three companies account for 90% of demand for China Re business

The demand structure of the reinsurance market in China is "highly concentrated" according to a report by analysts at Research and Markets. Three companies; Peoples Insurance Group, Pacific Insurance Group and Pingan Insurance Group accumulatively occupy nearly 90% of market demand.

The main business of the Chinese reinsurance market, according to the report, is compulsory reinsurance and property reinsurance. China Reinsurance Group is the only reinsurance company to run compulsory reinsurance business. It is also the sole professional reinsurance company and the largest market provider in China, accounting for more than 90% market share.

A statement by Research and Markets said that the property insurance market is concentrated mainly on Peoples Insurance Group, accounting for 45.7% of business, Pacific Property Insurance Group, with 11.4%, Pingan Insurance Group with 10.7% and China United Property Insurance Company with 9.4%. These four companies accumulatively account for 77.2% of property business.

The market share of many other insurance companies is less than 1%, so the property insurance market takes on the situation of monopolisation. Meanwhile, the life insurance market is mainly focused around China Life Insurance, with 46.2% of market share, Pingan Insurance Group with 16.85%, Pacific Property Insurance Group with 9% and Xinhua Insurance with 6.5%. The total market share of the top four accounts for 78.6%.

The report added that there is ‘high concentration’ in the direct insurance market, with relatively few companies serving a broad client base. As such, market competition is fierce, since several large insurance companies have nearly equal competitiveness, and are able to influence the market trends.

It is forecast that foreign-backed insurance companies will gain market share in some developed cities in China with advantages in management and R&D, while domestic insurance companies will maintain a leading role in the market due to their existing distribution network.

The report concludes that the Chinese market will “follow the international trend” towards larger-scale (re)insurance groups, with mergers and reorganisation as a necessity to survival.