Hugh Savill, Director of Regulation, ABIChina was a major target market for UK insurers, in particular those in the long-term savings sector, long before the Brexit vote. That vote, however, brought into sharp focus how important it will be for UK insurers to look beyond Europe as it seeks to expand overseas and make the best of Brexit.
So it was welcome that yesterday the Department for International Trade hosted a roundtable to gather the industry’s views and questions on the challenges and opportunities of expanding into China. It was an opportunity for me to feed in what I had learnt when, six weeks after the Referendum, I got on a plane to Beijing in pursuit of the positive benefits of EU Exit for the insurance industry.
The Government is very keen to encourage British business to expand in international markets, and this was confirmed by the strong support I received from the Embassy in Beijing during my trip. The ABI will be scaling up its work on international issues in response to this. For example, the UK/China Economic and Financial Dialogue takes place this autumn, and we have fed through to the Treasury some ideas to improve the regulatory environment for pensions in China.
The main purpose of my visit was to attend the Conference of the Insurance Association of China - more or less the equivalent of the ABI in China. I also called in on the Deputy Secretary General of the IAC, on the Director of the Insurance Society of China, and also on the regulator CIRC. Conveniently they are all located in the same office block on Beijing’s Financial Street.
The Chinese insurance market is growing very rapidly, and as a result China has just overtaken the UK as the third largest insurance market in the world. Not surprisingly, the people I spoke to were full of confidence about the future of the Chinese insurance market. These growth rates make the market highly attractive to invest in, and several well-known British brands are already present.
What should ABI members do if they are interested in China?
Entry to the Chinese market is a major commitment, not least in terms of senior management time, and should not be undertaken lightly. It is essential to invest in in-depth understanding of the Chinese market, and the expectations of the Chinese system more generally. The UKTI arm of the new Department of International Trade is an excellent place to start.
I shall finish by repeating the three pieces of advice I was given by CIRC officials when I asked what they would suggest to a British firm interested in the Chinese market for the first time:
- Consider carefully the different models available for participation in the Chinese market: joint venture with a Chinese partner, equity stakes in Chinese insurers, wholly owned foreign insurers (not yet permitted).
- Consult closely with British insurers with existing experience of the Chinese market.
- Study closely the requirements of the Chinese authorities – both government and regulators.
Hugh Savill is Director of Regulation at the Association of British Insurers (ABI) and was a senior official at the Department of Trade and Industry for 20 years.