Navigating the Property & Casualty Insurance Market in China

Transcription

1 Navigating the Property & Casualty Insurance Market in China Colleen J. Dey, US CMS Underwriting Manager Elaine Jin, China CMS Manager Justin Leow, APZ Technical Manager, LCS

2 Agenda Insurance market overview Regulatory environment Casualty & Property Insurance Property Challenges A Loss Control Perspective Benefits of a Controlled Master Program Questions & Answers

3 Overview of Chinese Insurance Market 1958 Suspended domestic insurance business 1992 First foreign insurance company (AIG) licensed in Shanghai, China 1995 Promulgation of Insurance Law of PRC 1998 China Insurance Regulatory Commission (CIRC) marked the standardization of Chinese insurance regulation 2001 China s acceptance into the World Trade Organization

4 Chinese Insurance Market Written Premium USD Billion $80 $70 $60 $50 $40 $30 $20 $10 $0 Non-Life Written Premium Source: CIRC Website

5 Chinese Insurance Market - Profitability USD Billion P&C Paid Loss $25 $28 $35 Loss Ratio 66.29% 63.10% 61.22% Gross Profit $0.56 $3.58 $4.75 UW Gross Profit $1.58 $1.33 $2.80 USD Billion Gross Profit Profit Ratio PICC $ % PingAn $ % CPIC $ % Source: Baidu Wenku Data

6 Chinese Insurance Market A&H 5% Enterprise Property 7% Written Premium by Segment Marine Cargo 2% Liability 3% Agriculture 1% Credit & Guarantee 3% Automobile 79% Source: Axco CIRC and The Yearbook of China s Insurance 2010 Non-life Written Premium US $63.92 billion

7 Overview of Non-Life Insurers Number of Non-Life Insurers in 2011 Local 38 Foreign 21 Total Non-life Written Premium US $75.9 billion Source: CIRC Website

8 Regulatory Environment China Insurance Regulatory Commission (CIRC) Provincial vs. National laws Filed rates and forms Premium payment rules Reinsurance

9 Regulatory Environment (Continued) State Administration of Foreign Exchange (SAFE) Foreign Exchange Regulations Anti-Money Laundering For local policies with premium > CNY 200,000, the local insured must provide: Business License Organization Code Certificate Tax Registration Certification Business License or ID/Passport of Majority Shareholder/Parent Company ID/Passport of the Legal Representative

10 Addressing Regulatory Challenges Continuous Communication

11 Chubb s History in China 1985 Early 90 s Market opens to foreign firms Beijing Rep. office opens & relationship with PICC begins Chinese government invites a delegation of Chubb executives to Beijing to discuss insurance issues Training and other technical assistance efforts occur to demonstrate commitment to developing the Chinese insurance industry An invitation to apply for insurance license issued Chubb starts writing local business in Shanghai Chubb is the second US nonlife insurer to obtain a license to sell property and casualty insurance in China & relationship with Ping An begins Chubb opens branch in Nanjing Chubb obtains approval to establish a branch in Jiangsu Province

12 Local Capabilities Chubb Branches Shanghai Jiangsu Beijing (Rep. Office; no ability to issue policies) GWP by Province Chubb Affiliates PICC Ping An Source: Aon Benfield, Inpoint

13 Chubb China Underwriting Capabilities CSI Chubb Specialty Insurance D&O, Crime, Financial Institutions, Professional Indemnity CCI Chubb Commercial Insurance Life Sciences, Products Recall, E&O Auto Parts, Clean Tech A&H Accident & Health Insurance Group Personal Accident, Travel Products, i-series Travel Products, High-End Medical

14 Chubb China Service Capabilities Loss Control Claim Handling Multinational Claim Unit Global Loss Run Report

15 Casualty Insurance

16 The Casualty Market Driven by Contractual Requirements The insurance demand is still driven by contractual requirements Starting to see some demands from Chinese Government & industry associations Casualty Climate Legal climate similar to the other Asian countries, except Hong Kong and Singapore where there is a more developed legal system and more litigious market Civil law country

17 The Casualty Market Policy Form ISO policy form is common in China market AI/PI excluded Territory: PRC excluding Hong Kong, Macau and Taiwan Premises must be scheduled

18 Casualty Limits/Deductibles Policy Limits Limits vary depending on the risk CNY10m-20m (USD M) is common for local risks, but there is an up-trend in demand for higher limits, especially for overseas risks, real estate and hotel chains Deductibles Deductibles are required on case by case basis

19 Property Insurance Local standard is All Risk excluding Earthquake and Tsunami, SRCC, Terrorism, Arson, Pollution and Mechanical Breakdown Policy valuation is on a reinstatement basis Coinsurance provision typically 100% Deductibles are generally low, less then $2,500

20 A Loss Control Perspective

21 Property Loss Control Perspective Rapid growth of economy Congestion in urban areas Varying standards of construction and protection Natural hazards Project ownership and management

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23 2010

24 Rapid Growth T30 Hotel, near Changsha, Hunan province. 30 stories 358 rooms 17,000 sqm. US$17mil How long did it take? Video (Source: Broad Group)

25 Rapid Growth the Next Big Thing 828m 838m 632m 634m Shanghai Tower Tokyo Skytree Burj Khalifa Sky City One (Source: Broad Group)

26 Rapid Growth - Implications Congestion in urban areas Varying quality of projects Private fire protection systems Public protection services Flash flooding Cost Quality Scope Schedule

27 Construction Quality Generally fire resistive (reinforced concrete) or non-combustible (metal, masonry, RC) Combustible insulation (EPS) used in older buildings in colder regions. Generally good construction build unless severely cost-constrained or poor management

28 Private Fire Protection Systems Sprinkler code - Chinese GB vs. NFPA 13 or EN or AS 2118 Variance especially for high-challenge occupancies e.g. high rack storage, ESFR Water tank with dual pumps Yard hydrant requirement based on area Local fire alarms to guard house

29 Private Fire Protection Systems Design & installation adequacy depends on contractor s competence & owner s requirements Lack of onsite testing equipment Counterfeit sprinklers & portable fire extinguishers Maintenance depends on owners & contractors (Source: UL)

30 Public Fire Protection Full-time fire fighters, welltrained and equipped Fewer fire stations than required Response time affected by city congestion Outside city, travel >20km Water supply adequate in major cities (except old quarters) and industrial parks; hydrants 100m-150m

31 Premises Security Good complement of guards CCTV systems Local security alarms to guard house What s this?

32 Natural Hazards - EQ (Source: 人 神 之 间 and Archey Firefly at en.wikipedia)

33 EQ Intensity (Source: DER) MMI: Shanghai VII. Beijing VIII. Suzhou VII. Shenzhen VI.

34 Chinese EQ Deaths of Date Location Magnitude Deaths Shensi , Yunnan 7.5 1, Haiyuan, Ningxia , Near Luhuo, Sichuan 7.3 3, Yunnan 7.1 5, Tsinghai , Xinjiang , Sichuan 7.4 9, Assam,Tibet 8.6 1, Guangdong 5.9 3, Yunnan Province , Haicheng 7.0 2, Tangshan , Eastern Sichuan , Southern Qinghai 6.9 2,968 (Data: USGS)

35 Natural Hazards - Flood (Economic Loss USD 'billions) Sichuan $4.92b N. East $4.63b Var $1.69b Beijing $4.80b Var $1.19b Var $2.73b Jun July Aug Sep (Data: Aon Benfield Global Cat Recap) (Source: Univ. of Leeds, N. G. Wright, S. F. Balica, F. van de Meulen / Journal of Natural Hazards via Springer)

36 Natural Hazards - Flood River flooding is a major concern in areas along the Yangtze, West, Heilongjiang, and Yellow Rivers Flash flooding in urban areas due to inadequate drainage Coastal flooding due to storm surge and rising sea levels Flood risk mapping at various stages for different regions Flood is an All Risk cover

37 Natural Hazards - Wind (Source: Citynoise at en.wikipedia / Data from Joint Typhoon Warning Centre & US NOAA)

38 Project Ownership & Management Owner s risk management posture underpins build quality Specify clear requirements especially on fire protection Engage reputable Grade A contractors Hands-on approach and constant supervision by project team

39 Addressing Property Challenges Advance planning & regular updates Utilize Insurance Company resources Insured s commitment to global risk management practices

40 Benefits of a Controlled Master Program

41 Controlled Master Program - Property Difference In Limits All Risk 100% Coinsurance Warranties No Warranties All Risk No Coinsurance Replacement Cost China No Coinsurance No Warranties All Risk 100% Coinsurance All Risk Theft Excluded Replacement Cost Warranties Mexico Difference In Limits No Warranties All Risk 80% Coinsurance No Coinsurance All Risk Replacement Cost U.K.

42 Features of a Chubb Controlled Master Program One deductible (for all risk perils) Supplementary cover Currency devaluation up to policy limit Coinsurance deficiency up to policy limit Tax Liability $250,000 (with option for higher limit) Collectibility Provision Multinational Claim Unit services

43 Navigating the Chinese Insurance Market Parent Insured WGA Boston Subsidiary Insured CCIB / WISE Shanghai

44 Navigating the Chinese Insurance Market Selecting a Global Insurance Carrier Full-service owned operations Strong relationships with top domestic insurers Owned Loss Control Professionals Coordinated multinational claim handling Partnering with a Chinese Servicing Agent with: Longevity in the Chinese insurance market Strong Relationship with CIRC Knowledge and ability to service multinational business 使 用 您 的 资 源

45 Questions

46 This presentation is informational in nature and should not be relied on for professional advice. This literature is for informational purposes only. Distribution in certain states may be limited to licensed surplus lines brokers. The precise coverage afforded is subject to the terms and conditions of the policies as issued. With respect to any loss scenarios, whether or to what extent a particular loss is covered depends on the facts and circumstances of the loss and the actual coverage of the policy as issued.