1.
DAGONG EUROPE - www.dagongeurope.com
Linas Grigaliunas
Director
Financial Institutions Analytical Team
linas.grigaliunas@dagongeurope.com
Carola Saldias
Senior Director
Sector Head Financial Institutions Analytical Team
carola.saldias@dagongeurope.com
China’s Insurance
Market Overview
Characteristics & Trends
15 September 2015
Commentary

2.
Insurance
2
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
TABLE OF CONTENTS
1. INTRODUCTION
2. INDUSTRY HIGHLIGHTS & MAIN TRENDS
3. OUTLOOK
4. MAIN CHALLENGES
5. CHINA’S INSURANCE MARKET OVERVIEW AND MAIN INDUSTRY
DRIVERS
6. CHINA’S INSURANCE MARKET STRUCTURE AND LARGEST
PLAYERS
7. MAJOR BUSINESS SEGMENTS’ CHARACTERISTICS AND TRENDS
a. Life insurance – Continues to dominate the market, reinforced by
return of high-premium growth
b. Accident and Health insurance – High growth potential
c. Non-life insurance – Gaining weight and delivering stable growth
8. REGULATORY DEVELOPMENTS
9. APPENDIXES

3.
Insurance
3
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
1. INTRODUCTION
The sluggish economic environment and low interest yields among the majority of countries
across the world continues to be a major point of discussion. While the insurance business in
the mature markets is relatively stable and well-understood, it offers few growth prospects,
with Life premiums growing by only 3.8% and Non-life by 1.8% in the advanced economies in
2014. As with other industries, insurance players are keenly looking beyond their home
regions for opportunities offered by globalisation.
A number of emerging insurance markets including the Kingdom of Saudi Arabia, Malaysia,
Mexico, Turkey, UAE and Brazil are widely considered to be high-potential growth markets.
However, China dwarfs all the emerging markets in terms of size and speed of economic
development. With its slowly liberalising economy and opening-up insurance industry, China
offers both significant growth opportunities and huge challenges.
In this report we provide our updated overview of China’s insurance industry and the main
characteristics and trends.
2. INDUSTRY HIGHLIGHTS & MAIN TRENDS
 China’s insurance industry is expanding rapidly at 17.5% yoy in 2014 and 19.3% yoy
in 1H151
.
 The Life2
business returned to a high growth rate, with 18% in 2014 and 21.3% in
1H15. Non-life growth was stable at 16% in 2014, but slowed down to 10.9% in 1H15.
 The foreign insurers’ market share is still very low at 2.2% in Non-life and 5.8% in
Life, although growing slowly.
 The profitability of the industry has improved significantly, by 106% in 2014, and
approx. 200% in 1H15, largely driven by investment income. We expect volatility in
profitability to increase, mostly as a consequence of volatility from investment income
deriving from a scenario of interest-rates reduction and increasing volatility in China’s
equity markets.
 China’s insurance industry is highly concentrated, with the top three largest players
in both Life and Non-life underwriting close to a half or more of their respective
markets’ Gross Premiums Written. The top three largest Life players accounted for
48.5% (53.7% in 2013) of the market and Non-life accounted for 64.7% (64.8%).
 China’s Non-life insurance market is still immature, highly imbalanced and
concentrated in motor insurance, which accounts for about 75% of the total Non-life
premiums.
 China’s government and the China Insurance Regulatory Commission (CIRC) are
willing and committed to modernising and further developing the local insurance
market through market reforms. A number of important new pilots were initiated in
2014 and 1H15, which we expect will make the industry more open, economic risk
and market-driven.
 The market solvency level is deemed positive at the current regime, although is
expected to be lower once the new risk-based C-ROSS3
regime begins in 2016.
1
CIRC
2
Includes Accident & Health as reported by CIRC
3
China Risk-Oriented Solvency System (C-ROSS)
China’s insurance industry is
highly concentrated: the top
three largest players in both
Life and Non-life underwrite
around half of their
respective markets’ GPW

4.
Insurance
4
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
3. OUTLOOK
 China’s insurance market promises high growth in a global context of limited industry-
growth prospects. This is based on a number of long-term more stable factors such
as low penetration, low density and large population; and more dynamic medium-
term factors such as slowing but still fast economic growth and social development,
the economic growth-focused policy and market-opening, and the liberalisation-
oriented regulatory environment.
 We expect the overall insurance market in China to grow at above 15% in 2015-16
with Accident & Health (A&H) business expanding fastest, followed by Life, and
slowing but still double-digit growth in Non-life.
 The speed and scale of the insurance industry’s development in China will be highly
dependent on the upcoming regulatory reforms. We expect liberalisation and the
opening of the market to continue, but complexity should remain a major issue.
 We expect the new solvency regime to improve risk oversight and management in
the industry, and possibly increase consolidation between weaker, smaller players.
 We expect investment income and overall profitability to be more exposed to
financial market volatility.
4. MAIN CHALLENGES
 Increased domestic financial market volatility, which could affect investment returns
and solvency capital.
 Increased need for additional capital when C-ROSS is implemented across the
industry, due to more comprehensive risk-based solvency capital calculation with a
broader scope and varying capital charges compared to the existing solvency
regime. This is particularly evident for companies suffering from bottom-line losses
or low profitability in the fast premium-growth environment.
 Limited investment and asset-liability management opportunities due to various
investment restrictions, volatile and relatively shallow capital markets and lack of a
long-term bond market.
 Constrained and slow expansion of distribution channels and shortage of
experienced sales personnel.
 Cultural misperception of insurance products and their economic benefits. High and
increasing competition, which could lead to price wars and underwriting losses.

5.
Insurance
5
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
5. CHINA’S INSURANCE MARKET OVERVIEW AND MAIN INDUSTRY
DRIVERS
China’s insurance market showed strong growth in 2014 and is expected to continue
in 2015-16
Insurance market growth
China’s insurance market is the fourth largest in the world and one of the fastest growing. At
end-2014 its Gross Premiums Written (GPW) stood at EUR 266Bn4
(RMB 2.0Tn), up by
17.5% (11.2% in 2013) compared with end-20133
. In comparison, during the same period total
premiums in the top three largest markets - US, Japan and the UK - stood at
EUR 1,058Bn (USD 1,280Bn), EUR 365Bn (JPY 52,756Bn) and EUR 274Bn (GBP 213Bn5
),
and grew at 2% (-1.3%), 5.7% (-4.2%), and 2.4% (0.2%) respectively. The high growth has
continued into 2015 with GPW in 1H15 reaching RMB 1.37Tn, an increase of 19.3%.
Usually GDP growth is an effective proxy for insurance industry growth. GPW in China has
been growing even faster than GDP (7.4% in 2014), at a compound annual growth rate
(CAGR) of 16.7% over the last decade6
(5-year CAGR was 12.7%). The high growth can be
explained by the very young nature of the insurance industry in China, and favourable and
rapidly improving economic conditions over the last decade.
Ex. 1: China's insurance industry GPW and GDP growth rates (2005-14)
Source: CIRC, IMF, Dagong Europe
The industry growth in 2014 was driven by Life business (including Accident & Health), which
picked-up significantly to 18% from 8% a year ago, while Non-life expanded at a largely stable
rate of 16%, compared to 17% a year ago.
Historically, Life insurance has been the dominating sector and the main growth driver for
China’s insurance industry overall, with both growth rates closely correlating. At end-2014,
Life insurance accounted for 62.7% (1.3pp decrease) and Non-life for 37.3% (1.3pp increase)
of China’s total insurance market GPW.
Since 2005, on average Non-life premiums have grown faster and with more stable rates than
Life, and slowly increased in market share. Life growth rates only exceeded Non-life in 2008
and 2014. A sharp fall in the Life insurance growth rates in 2011 was related to regulatory
changes and had a negative impact on the industry.
4
CIRC, this figure excludes premiums from reinsurance
5
Swiss Re Sigma 3 2013
6
CIRC, Dagong Europe
-10%
0%
10%
20%
30%
40%
50%
2014201320122011201020092008200720062005
Total GPW growth Non-life GPW growth Life GPW growth GDP growth
GPW in China has been
growing even faster than
GDP (7.4% in 2014), at a
CAGR of 16.7% over the last
decade

6.
Insurance
6
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
Ex. 2: China's insurance market GPW overall and by major business lines (2007-14)
Source: CIRC, Dagong Europe
Overall, such high and sustained historic growth rates are unprecedented. Over the last
decade, the Life sector has delivered CAGR of 15.0% (5-year CAGR to 2014 of 7.9%), and
the Non-life sector even higher CAGR of 20.8% (5-year CAGR to 2014 of 20.2%). The
insurance industry’s gross exposure has also expanded rapidly and, as reported by CIRC,
reached RMB 1,114Tn in 2014, an increase of 25.5% compared with 2013.
Future growth expectations and main drivers
In our opinion, a return to the historic highs in market growth of 30-40%, seen in 2010 and
2008, is highly unlikely. This is because historically the industry has developed from very low
levels and has been supported by China’s opening of the financial market and high GDP
growth. Now the industry has already reached a significant size in absolute terms and the
economy is moving to a new norm of slower and more sustainable growth.
A number of macro factors, such as low insurance penetration and density, the huge
population, and increasing disposable income indicate large growth opportunities. However,
it will depend to a large extent on the speed and effectiveness of regulatory reforms, tax
incentives and a further reducing of regulatory hurdles. We remain positive and expect the
market to continue growing at rates above 15%, well above developed and many other
developing markets.
Relatively stable long-term growth drivers
The three main factors that indicate the potential growth of the insurance market in the long
term - low insurance penetration, low insurance density and a large population - are highly
supportive for the industry. These factors are usually quite stable, develop incrementally and
are highly unlikely to change significantly in the short to medium term.
 Low insurance penetration (measured as GPW/GDP) stood at 3.2% at end-2014, up
from 3% a year ago. At this level, insurance penetration is relatively low compared with
6.2% across the world, and up to 12% in developed markets. This indicates a relatively
small size and spread of the insurance industry in the Chinese economy. Looking
deeper, the Life insurance penetration rate was 1.7% (1.6% in 2013) and Non-life only
1.5% (1.4%)7
. The fact that China is the world’s largest and a still-growing manufacturer8
while having such low insurance penetration also implies an undeveloped Non-life
insurance sector and high growth potential, particularly in property & fire, liability, natural
catastrophes, trade credit, business interruption and Health insurance.
7
Swiss Re Sigma 4/2015 & 3/2014, which treat Accident & Health (A&H) insurance as part of Non-life business, while
in the rest of report we consider A&H as part of Life business, as defined by CIRC.
8
United Nations
0.0
0.5
1.0
1.5
2.0
20142013201220112010200920082007
RMB Tn
Accident & Health Life Non-life Total insurance market
Low insurance penetration,
low insurance density and a
large population indicate
potential growth

7.
Insurance
7
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
Ex. 3: Total insurance penetration: premiums as % of GDP (2012-14)
Source: Swiss RE – Sigma 4/2015, Dagong Europe
Ex. 4: Life and Non-life insurance penetration: premiums as % of GDP (2012-14)
Source: Swiss RE – Sigma 4 2015, Dagong Europe
 Low insurance density (measured as GPW/Capita) stood at USD 2359
at end-2014:
relatively low compared with mature markets where it ranges from USD 2,000 to USD
7,000 per capita, and the world average at USD 662. Considering the structure per
sector, as with the global industry Life insurance in China has higher density compared
to Non-life, at USD 127 and USD 109 per capita.
In our view, the low insurance density is due in general to the relatively short history of
the insurance industry in China, relatively low disposable income per capita, a low
awareness level and expectations that the government will always support in times of
crisis or natural disasters. At the same time, this suggests that market expansion could
be immense, as the government shifts from the role of support provider in difficult times
to a multi-layer system that allows a more significant role for the private sector (insurance
market). It is in line with the broader policy of shifting towards a market-driven economy
and similar to the new government’s deposits guarantee scheme implemented for banks.
If we assume that China will reach the world average density, insurance industry
premiums will increase by almost three times and be twice the size of Japan, the second
9
Swiss Re Sigma 4/ 2015
0%
3%
6%
9%
12%
Japan UK France Italy USA Germany World Brazil India China
2012 2013 2014
0%
1%
2%
3%
4%
5%
0%
2%
4%
6%
8%
10% Non-lifeLife

8.
Insurance
8
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
largest insurance market by GPW, and reach about 70% of the US, the largest insurance
market in the world at end-2014 with GPW of USD 1.28Bn.
Ex. 5: Total insurance density: premiums per capita (2012-14)
Source: Swiss RE, Dagong Europe
In 2014, disposable income in China’s rural areas grew by 11.2% reaching RMB 10.5Th,
and in urban areas grew by 9% reaching RMB 28.8Th10
. As insurance awareness
increases and disposable income per capita grows, we believe it will shift China’s
insurance density rates closer to the world average and those of the developed markets.
Ex. 6: Life and non-life insurance density: premiums per capita (2012-14)
Source: Swiss RE, Dagong Europe
 The largest population in the world: China has the largest population in the world
which is steadily growing, with 1.4Bn11
inhabitants in 2014 providing an enormous
customer base for the insurance industry. In comparison, Europe’s population was
816Mn, North America’s 354Mn and Latin America’s 619Mn at end-201412
. In 2014 the
Chinese population increased by 14.1Mn.
In addition, China’s population is aging faster than in Europe or North America. To a certain
extent this is a result of the one-child policy, which was relaxed in 2013. We expect its
cessation to have a positive impact on the population growth, however the scale of the impact
is yet to be seen as many Chinese couples are used to the prospect of having only one child,
10
China National Bureau of Statistics
11
China National Bureau of Statistics
12
Swiss Re Sigma 4 2015
0
1
2
3
4
5
UK USA France Japan Italy Germany World Brazil China India
USD Th
2012 2013 2014
0
1
2
3
4
USD Th
0.0
0.5
1.0
1.5
2.0
2.5
USD ThLife Non-life

9.
Insurance
9
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
which has been promoted over decades.
Having one child is also more practical
and economical.
Increased urbanisation is also an
influencing factor: At the beginning of
2014 the government released some
details on the National Urbanisation Plan.
It predicts that by 2020 the country will
have about 60% of its population living in
cities. This will lead to an increase in living
standards, medical and protection needs
and consequently demand for insurance
products. Overall, we expect the aging
population to boost demand for new insurance products and services to meet their needs.
Relatively dynamic medium-term growth drivers
We also identified four relatively dynamic factors important to the Chinese insurance industry’s
growth and development: fast economic development, economic growth-oriented policy,
accelerating social and technological development, and a market liberalisation-oriented
regulatory environment. We believe these factors can change relatively quickly (6 to 18
months), and therefore carry a higher degree of uncertainty regarding future direction and
speed of progress. Therefore, we consider them as short to medium-term growth drivers. We
believe these factors have moderate to positive trends, and overall positively affect the
industry.
 Fast economic development: China has been leading the world’s economic growth by
the size and the speed of its development. The sustainability of growth and slow down of
the economy in the last two years is a matter of concern not only for the Chinese
authorities but globally. It is widely perceived that China is entering a lower growth period.
In 2014 its GDP grew by 7.3%. We expect the country’s economic growth to slow down
to about 6.8% in 2015 and pick up to 7.3% in 2016 (based on Dagong Global estimates),
which should be sufficient to stimulate expansion in the insurance sector.
 Economic growth-oriented policy: In general, the government’s policy is focused on
maintaining economic growth and moving towards a more ‘market-driven’ economy to
maintain wealth creation in the country. In 2015 the Chinese government is taking various
measures and introducing reforms to address the economic slowdown and deliver
targeted GDP growth (such as reducing the reserves ratio requirement for Chinese banks
in order to release money and stimulate the economy). The plans are promising, but only
time will show if and how well the slowdown in growth can be managed.
The government’s policy direction and its predictability is highly important for the
development and regulation of China’s insurance market. In September 2014 CIRC
published “Opinion on Development of the Modern Insurance Industry”, stating its goal
for insurance penetration to reach 5% (implying average annual growth in premiums of
16.5%) and density of USD 571 per person by 2020. It also stated goals for the insurance
industry to become an effective stabiliser of society and a booster of the economy.
Although sudden changes in policy and individual developments are difficult to foresee,
we believe favourable economic policy will further aid the insurance market’s
development and growth.
 Rapid social and technological development: Socially, China is developing quickly,
driven by a rapidly growing middle class and its evolving needs, including a need for more
financial security, safety, healthcare and predictability for the future. Chinese society is
Source: United Nations
Ex. 7: Population (2014)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
RMB Bn
In September 2014 CIRC
stated its goal for insurance
penetration to reach 5%,
implying average annual
growth in premiums of 16.5%

10.
Insurance
10
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
highly technology-savvy and the penetration of high-tech gadgets in everyday life is high
and still growing.
As an example, the mobile phone industry has been growing at record levels with mobile
subscriptions reaching 1.3Bn in 2014 compared to 0.6Bn13
in 2008. This presents great
sales, marketing communication and other opportunities for the insurance industry.
Another example is the recent (July 2015) partnership of Alibaba Cloud (Alibaba Group's
cloud computing subsidiary) and eBaoTech (insurance software and related services
provider) to launch eBaoCloud, an internet insurance cloud platform14
. eBaoCloud is an
innovative platform aimed at enabling insurers to launch online internet products, quicker,
cheaper, operationally efficient and with the support of big-data analytics.
We expect that the increasing use of technology will fuel insurance products and
distribution innovation and development, enabling insurers to approach target audiences
faster, in more innovative and cost-efficient ways, and it may possibly fundamentally
change the nature of certain activities.
 Slow, but market-opening and liberalisation-oriented regulatory environment:
Regulators have been playing a pivotal role in the industry’s growth and development,
however they have tended to be slow and highly protective of domestic players in
liberalising and opening up the market. With the recent VAT reforms, the widening of
investment limits opening opportunities to invest abroad, and the running of pilots to open
up and enhance motor, health, agricultural and other product lines, we expect a positive
effect on the industry and its customers.
Overview of balance-sheet factors and profitability
While GPW is a very popular and common growth metric, it is important not to forget
developments on the balance-sheet side. The assets of the Chinese insurance industry on
average have been growing even faster than GPW, and in 2014 reached RMB 10.2Tn.
The growth in assets is only partially explained by growth in GPW. To a large extent it has
been driven by growth in Life, universal and unit-linked products which are asset-heavy, but
not included in the GPW calculation.
This indicates the enormous power of the industry as an institutional investor and the need
for deep and liquid financial markets, and a wide range of investment opportunities. In 1H15
total assets continued to expand rapidly at 12.5%, and reached RMB 11.4Tn.
Ex. 8: China's insurance market: assets split (2014 & 2013)
Source: CIRC, Dagong Europe
The growth in total assets has historically been driven mainly by Life insurance companies.
However, lately Non-life insurance and reinsurance have increased their assets faster than
Life. In 2014 assets belonging to life insurers accounted for over 81% of total industry assets.
Non-life increased slightly to 13.8% from 13.2%, and reinsurance increased most to 4.3%
from 3.1%.
13
Dagong Europe – Industry Compass: Telecom 2015
14
eBaoTech http://www.ebaotech.com/2015/07/ebaotech-and-alibaba-cloud-launch-worlds-first-internet-insurance-
cloud-platform/
81.2%
13.8%
4.3% 1.7%
2014
82.3%
13.2%
3.1% 1.7%
2013
Life (including A&H)
Non-life
Reinsurance
Asset management
Lately, Non-life insurance
and reinsurance have
increased their assets faster
than Life

11.
Insurance
11
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
Ex. 9: China's insurance market: total assets and GPW development
Source: CIRC, Dagong Europe
Investments
In 1H15 CIRC expanded its guidance on insurance companies’ investments, relaxed some of
the constraints (such as investments abroad), and provided more flexibility for companies to
make more risk-based decisions and diversify. We expect this to allow insurers to improve
their asset mix, asset and liability matching, increase diversification and possibly improve
investment returns.
In 2014 Chinese insurers held the majority of their investments in bonds and bank deposits
(about 60%), although it has been decreasing over the last few years. The higher risk assets
– equities, real estate and other investments, increased their aggregate weighting to 40%. We
observed that in 2014 the share of equities held by insurers increased substantially to 14.8%,
which is likely to contribute to higher investment returns, but also add volatility and increase
the overall risk of the asset portfolio.
We also observed that Chinese insurers’
investments abroad have increased, in
particular in real estate in US and Europe, and
also in foreign banks and insurance companies.
Usually the investments are in highly regarded
properties in prestigious areas and contribute to
asset portfolio diversification (e.g. Anbang
Insurance paid Hilton Hotels USD 1.9Bn for the
iconic Waldorf Astoria hotel in midtown
Manhattan).
Capitalisation
Overall China’s insurance industry is sufficiently capitalised, according to the existing solvency
regime. However, we expect regulatory solvency ratios to weaken when C-ROSS is
implemented. In 2014 the total net assets of the combined industry stood at RMB 1.3Tn, up
by 56.4% compared with 2013. The growth was fuelled by increased profitability from
investments. In 1H15 net assets increased by 15.32% to RMB 1.5Tn.
Profitability
In 2014 the industry recorded significant improvements in profitability with profits up by 106%.
CIRC expects total profit to reach about RMB 230Bn in 1H15, growing by about 200%. The
expected improvement in profitability, in our view, is largely driven by more profitable Life
business and improved investment results. Underwriting profitability improved across all major
sectors, but Health still remains loss-making. We expect profitability to reduce in the second
half of 2015, due to significantly increased volatility and the weakening of China’s equity
market.
-5%
0%
5%
10%
15%
20%
25%
30%
35%
0
2,000
4,000
6,000
8,000
10,000
12,000
2009 2010 2011 2012 2013 2014
RMB Bn
Total GPW Total assets Total assets growth % Total GPW growth %
Ex. 10: China's insurance market:
investment split (July 2015)
Source: CIRC, Dagong Europe
25%
35%
14%
26%
Bank deposits
Bonds
Equities &
investment
funds
Other
investments

12.
Insurance
12
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
6. CHINA’S INSURANCE MARKET STRUCTURE AND LARGEST
PLAYERS
Impressive market size and continuing high growth, but highly concentrated in the top
three largest players and few business lines, in particular motor
China’s insurance market regulator requires legal entity separation for Life and Non-life
insurance. Currently, the industry is dominated by the Life insurance sector. Accident &
Health, according to the CIRC regulation, is included in statistics for the Life sector. However,
some Non-life players also provide A&H
insurance. In our view, the different risk
characteristics, business nature and
growth trends merit a separate analysis of
these sectors. In the following sections
we will look at Life and A&H as separate
industries and provide separate statistics
where possible.
In 2014 the industry’s GPW was divided
53.9% for Life insurance, 35.6% for Non-
life and 10.5% for Accident & Health.
The market share of Life business has
been steadily reducing, offset by growth in Non-life and Accident & Health.
Ex. 12: China's insurance market: evolution of GPW composition by major business lines (2007-
14)
Source: CIRC, Dagong Europe
At end-2014 there were 71 active Life insurers, 43 of which were regarded as local and 28
foreign; while there were 65 active players in the Non-life market and the local-foreign split
was 43 and 2215
. CIRC considers insurers to be foreign-invested if foreign ownership is at
25% or above. They are also subject to different, more thorough regulations.
Ex. 13: Number of insurance players in China (2012-14)
2012 2013 2014 2012 2013 2014
Active Life insurers 68 70 71 Active Non-life insurers 62 64 65
Local insurers 42 42 43 Local insurers 41 43 43
Foreign-owned insurers 26 28 28 Foreign-owned insurers 21 21 22
Source: CIRC, Dagong Europe
15
CIRC. Representative offices or branches not reported in CIRC’s statistics were not considered in this research.
10.5%9.2%8.1%7.2%6.6%7.2%8.1%8.2%
53.9%54.7%57.5%60.6%66.6%67.0%68.1%63.4%
35.6%36.1%34.4%32.2%
26.8%25.8%23.9%28.4%
0%
20%
40%
60%
80%
100%
20142013201220112010200920082007
Accident & Health Life Non-life
Ex. 11: Chinese insurance market: GPW split by
business line (2014)
Source: CIRC, Dagong Europe
35.6%
53.9%
10.5% Non-Life
Life
Accident &
Health
Source: CIRC, Dagong Europe
In 2014 the industry’s GPW
was divided 53.9% for Life
insurance, 35.6% for Non-life,
and 10.5% for Accident &
Health

13.
Insurance
13
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
Snapshot of the largest five insurance groups
In 2014 China’s insurance industry had 14 Insurance groups (9 local and 5 foreign). The main
five groups recorded RMB 1,292Bn of GPW, of which Life business accounted for 58% and
Non-life for 42%. The overall premiums of these five groups accounted for 64% of total GPW
in China, or 59% of Life and 72% of Non-life industry premiums.
Below we present the largest five insurance groups by GPW and their market shares in 2014,
among them, China Life, PICC and China Tai Ping are state-owned companies:
 The largest insurance group in China is China Life with GPW of RMB 371.6Bn and
an 18% overall market share. It is highly concentrated in Life (the largest life insurer),
with an 89% share of its total GPW, with Non-life accounting for only 11%.
 The second largest insurance group is People’s Insurance Company of China (PICC)
with GPW of RMB 331.1Bn and 16.4% overall market share. It is highly concentrated
in Non-life (the largest Non-life insurer), equivalent to a 76% share of its total GPW,
with Life accounting for 24%.
 The third largest insurance group is Ping An Insurance with GPW of RMB 316.9 Bn,
and a 15.7% overall market share. It is the largest insurance group to have a
balanced Life and Non-life business portfolio, with Life accounting for 55% and Non-
life for 45% of the group’s premiums.
 China Pacific Insurance Company is the fourth largest with GPW of RMB 191.5Bn
and a book balanced between Life and Non-life at 52% and 48% respectively. It is
significantly smaller than the top 3 groups and its premiums accounted for 9% of the
total industry GPW.
 China Taiping Insurance Group is the fifth largest with GPW of RMB 81.3Bn and 4%
of the overall market share. Life business accounted for 84% and Non-life for 16%.
Ex. 14: Top five insurance groups’ GPW and market shares (2014)
RMB Mn Market share %
Insurer Total GPW
Life (incl.
A&H) GPW
Non-life
GPW
Overall
Market Share
(MS)
Life (incl.
A&H) MS
Non-life
MS
China Life 371,640 89.1% 10.9% 18.4% 26.1% 5.4%
PICC 331,137 23.8% 76.2% 16.4% 6.2% 33.5%
Ping An 316,852 54.9% 45.1% 15.7% 13.7% 18.9%
China Pacific 191,529 51.5% 48.5% 9.5% 7.8% 12.3%
China Tai Ping 81,308 83.7% 16.3% 4.0% 5.4% 1.8%
Top 5 Total 1,292,466 58.1% 41.9% 63.9% 59.2% 71.8%
TOTAL MARKET 2,023,469 62.7% 37.3% 100.0% 62.7% 37.3%
Source: CIRC, Dagong Europe
7. MAJOR BUSINESS SEGMENTS’ CHARACTERISTICS AND TRENDS
a. LIFE INSURANCE – continues to dominate the market, reinforced by
return of high premium growth
Market growth
In 2014 Life business grew by 16% from 6% in 2013, reaching RMB 1.1Tn and a 5-year CAGR
of 7.9%. Looking at overall Life, as reported by CIRC including A&H, GPW grew at 18%, a
significant improvement from 8% in 2013, and reached RMB 1.3Tn. In 1H15 Life business
continued its high growth with an increase in premiums of 21.3%. This was on the back of a
significant contribution from traditional life products, helped by tax incentives.
The overall Life business has seen extraordinary historical premium growth rates, with a
CAGR of 28.5% during 2006-10, and has dominated the industry with a market share of over
In 2014 China’s insurance
industry had 14 Insurance
groups - 9 local and 5 foreign
The main five groups
recorded RMB 1,292Bn of
GPW, split 58% for Life
business and 42% for Non-
life

14.
Insurance
14
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
60%. However, growth slackened in 2011 and 2012 due to changes in the reporting basis of
China’s GAAP (from 2011 CIRC started to exclude most premiums from variable universal life
and investment-linked products), and the new banc-assurance regulation imposed by the
China Banking Regulatory Commission (CBRC) in November 2010, which has limited banks’
ability to collaborate with up to three insurance companies only. Since then there has been a
return to growth as life insurers adjust their strategies (including product innovation, improved
agents efficiency and reassessed relationships with banks), but to nowhere near the historical
highs of 2006-10.
Ex. 15: Evolution of Life GPW (2008-14)
Source: CIRC, Dagong Europe
Growth drivers
Going forward, in our view, the life business will be driven by growth in investment products,
regulatory reforms promoting regular life products, and tax reforms.
Top players and market structure
The Life insurance market is highly concentrated: In 2014 the top three insurers accounted
for a 48% market share (53.7% in 2013): China Life with 26.1% (30.4% in 2013), Ping An Life
with 13.7% (13.6%) and New China Life with 8.7% (9.6%), while the remaining 40 local players
accounted for 40.7% (45.7%), and the 28 foreign players shared the remaining 5.8% (5.6%)
market share. Over the last three years, the market shares have been relatively stable, with
a slight decrease in the largest player’s market share (China Life), and an increase in the
foreign companies’ share to 5.8%, from 5.6% in 2013.
Ex. 16: China's Life insurance market: composition by top 3 players, other domestic players and
companies with foreign ownership (2011-14)
Source: CIRC, Dagong Europe
-20%
0%
20%
40%
60%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2014201320122011201020092008
RMB Tn
Life GPW Life growth rate %
0.9
1.0
1.1
1.2
1.3
1.4
0%
10%
20%
30%
40%
50%
60%
2014201320122011
RMB Tn
Top 3 domestic players % Other domestic players %
Companies with foreign ownership % Total Life GPW

15.
Insurance
15
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
Distribution
Banking distribution in China, as in many other countries, is the main distribution channel for
life insurance products. Banks and insurance companies have widely adopted the banc-
assurance model. Close cooperation or common ownership allows both parties to leverage
on their expertise, increase distribution capabilities and customer base, and lower costs by
integrating operations. However, banks tend to charge relatively high commissions.
The multi and tied-agents sales channels also play a very important role. Historically they
have employed a large number of sales agents, however the efficiency and expertise levels
have been low, while agent turnover has been high. We believe tied-agents, although with
lower volumes, will remain important for traditional life products, which require in-depth
knowledge of the product and the customer needs. However, insurance companies need to
find a way to train and retrain a quality sales force, increase efficiency and maintain costs.
Products
The majority of life insurance products in China are short-term investment products (similar to
bank deposits), and products with profit-participating features. The high amount of single-
premium products which are high-volume, fee-based products, can expose the industry to
high top-line volatility, but with relatively low impact on the bottom line.
Traditional protection and regular premium products have a relatively low share, but they are
very important for the social development, emerging middle class and aging population. We
understand that the Chinese government is taking steps to promote development and the
spread of protection and pension products and expect to see their share increasing in the
coming years.
Profitability
In 2014 the life insurance industry reported materially higher bottom-line results. Based on
our analysis of the top 10 largest life players with an aggregate market share of 82%, net
income increased by 56%. The main driver was significantly improved investment income,
which grew by about 30%.
In our view, the industry showed good overall profitability in 2014, with return on assets
reaching 1.4% from 1% in 2013, and return on equity reaching 13.7% from 12.9%. However,
the performance is still subject to volatility in capital markets. Overall market results are likely
to be worse because our assessment included only the 10 largest players, which have the
largest distribution channels and economies of scale, meaning that the number of smaller
players most likely had weaker results.
b. ACCIDENT AND HEALTH INSURANCE – High growth potential
Market growth
The Accident & Health insurance sector is developing fast and is increasing its relative
weighting in the industry. According to CIRC rules, Accident & Health insurance is categorised
under Life business. However, some Non-life companies also write a small amount of
Accident & Health insurance. Unfortunately, it is not captured separately in CIRC reporting
and is therefore not included in our report.
The Accident & Health sector has been growing rapidly at 21.5% 5-year CAGR up to 2014,
albeit from historically low levels. Despite the volatile growth rates ranging from -2% to 52%,
total premiums have doubled roughly every five years.
In 2014, the industry expanded by 34%, the fastest rate in the whole insurance market, and
reached GPW of RMB 213Bn. Looking deeper, Accident insurance grew by 17.6% and Health
insurance by 41.3%, with GPW of RMB 54Bn and RMB 159Bn respectively.
Accident & Health insurance
is developing fast and is
increasing its relative
weighting in the industry

16.
Insurance
16
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
According to CIRC, in the first half of 2015 Health insurance expanded at 39.5%. We expect
the sector to grow at approx. 30-45% during 2015-16, based on high and increasing demand,
and economic and regulatory stimulus. We expect accident insurance to grow at 17-20%.
Ex. 17: Evolution of Accident & Health GPW (2008-14)
Source: CIRC, Dagong Europe
Growth drivers
In our view there are three main factors driving the historical growth in Health insurance, and
we expect this trend to continue in the future:
 Still under-development public health infrastructure that could meet the demand of the
timely, wide-range and high-quality services of such a large population in rural and
rapidly expanding urban areas.
 Fast-growing demand for healthcare services fuelled by a rapidly growing middle class,
an already relatively large affluent segment and increasing attention to health problems
exacerbated by the high level of pollution in densely populated areas; and
 Growing proportion of the aging population and the rising life expectancy. At end- 2014,
15.5% (14.7% 2013) of China’s population were aged 60 or over, 10.1% (9.7%) of which
were aged 65 or over16.
In 2014 the proportion of the population above the age of 65 in
China was well below the US, Japan and UK with 14%, 26% and 18% respectively17
. It
is widely expected that in the coming decades the number of elderly people in China will
increase significantly.
China’s government recognises the seriousness, complexity and importance of improving the
healthcare system and considers related reforms as strategically important. It is encouraging
private and foreign investment in the sector to boost the supply of health services and help
satisfy the ever-growing demand. There are a number of pilot projects in progress to test
various new policies and products before implementing them across the country, such as:
 China wants to utilise the expertise that foreign companies can bring to the market,
hence encouraging the establishment of the foreign professional health insurance
institutions in the Shanghai Free Trade Zone (SFTZ) to promote innovation and
development in the industry.
 The regulator wants to encourage spread, awareness and affordability, hence it has
launched a pilot program offering tax credits for people purchasing commercial health
insurance. It allows buyers of commercial health insurance policies each year to deduct
up to RMB 2,400 of premium payments from taxable income; and
16
China National Bureau of Statistics
17
The World Bank
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
0
50
100
150
200
2014201320122011201020092008
RMB Bn
Accident Health Health growth rate % Accident growth rate %

17.
Insurance
17
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
 The State Council issued a circular stating that China would expand basic medical
insurance to cover critical illnesses for all urban and rural residents by end-2015.
Top players
The largest private health insurance companies are Ping An Insurance Group (with an approx.
23% market share), PICC Health Insurance (with approx. 19%), and China Life (with
aprrox.17%).
Distribution
The distribution of health products is quite expensive due to the significant administrative
burden, and is mainly carried out via own agents’ sales force and brokers (Somewhat similar
to the developed markets where brokers dominate, but online platforms are rapidly increasing
their importance). In China, new distribution channels utilising internet, mobile and telephone
solutions are developing quickly and we expect them to boost the industry. Furthermore, the
integration with telemedicine, diagnostics, online prescription sales and electronic medical
records could revolutionise the whole healthcare system. A clear example is Ping An’s efforts
to integrate insurance products with services via investments in telemedicine and cooperation
with Alibaba, which is expanding into the health sector via online drug sales.
Accident insurance is mostly distributed by agents, and brokers also distribute a considerable
share. In the last few years, telesales and online channels have been expanding rapidly.
Products
The majority of health insurance products are quite basic and usually cover only medical
expenses. Regulators are promoting new product developments (such as critical illness and
more comprehensive health covers) and spread across the country.
Profitability
Although the industry is growing fast, we understand that the majority of players are still
making underwriting losses, due to claims expense inflation, high acquisition costs and high
price competition. More predictable and transparent medical expenses and better data on
customer health would aid prudent underwriting and ensure more accurate pricing levels, and
deliver underwriting profits. We believe this will be a difficult task for the industry and the
regulator to achieve quickly, and will take a number of years.
Key trends and challenges
There are still number of direct and indirect challenges affecting the industry’s development,
for example public hospitals are dominating healthcare in China and rely heavily on funding
from fee-for-service charges and margins on prescribed drugs. Therefore, these service
providers have little incentive to collaborate with insurance companies. They often use their
monopolistic power to charge patients with private insurance higher fees. In addition, high-
quality medical data to assess the health risks for the population is scarce. These factors
make the pricing of insurance policies and claims management difficult.
Building own high-quality service providing networks is useful and provides solid competitive
advantages in the long term, however it is slow and requires significant upfront investment.
Private and foreign hospitals could help to mitigate this issue, but they also face considerable
challenges such as a shortage of highly qualified staff for the large size of the population,
restrictions and complex rules for foreign doctors working in China. The lengthy approval
process of importing high-end medical devices is also slowing down industry development.
Due to these and other peculiarities of the Chinese market, many successful foreign health
insurance companies (e.g. Cigna, MSH and BUPA) who have come to China have struggled
to expand meaningfully across the country and have instead concentrated on niches, such as
the expatriate community or the local affluent classes demanding high-end service providers.
High-quality medical data to
assess the health risks for
the population is scarce

18.
Insurance
18
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
The lack of tax incentives for group health insurance has also been a drag on the industry,
however with new initiatives and pilots this may change and support industry development
and the wider public.
c. NON-LIFE INSURANCE – Gaining weight and delivering stable growth
Market growth
In 2014, Non-life business showed another year of solid growth with GPW reaching
RMB 720Bn, an increase of 16% compared to 17% in 2013. On a ten-year CAGR basis
premiums grew by 20.8% and on a five-year basis by 20.2%. The first half of 2015 showed
Non-life GPW of 401.8Bn, with growth slowing to 10.90%. For 2015 we expect growth to slow
down to about 10-12%, due to the slowdown in the economy and car sales, but to pick up to
about 15% in 2016 as economic and industry-stimulating reforms are implemented.
Ex. 18: Evolution of Non-life GPW (2008-14)
Source: CIRC, Dagong Europe
Growth drivers
Non-life insurance remains largely under-penetrated due to various limitations, including basic
product range, low awareness, low penetration in rural areas, and lack of effective distribution.
In our view the regulatory reforms and growth-oriented economic policy are addressing these
issues and as a result will drive the industry’s growth.
China’s Non-life insurance market is highly concentrated in the motor business line, which
has historically been the main growth driver. It continues to be the main contributor in absolute
terms, but the growth in many other lines is picking up and exceeding motor in relative terms.
Top players and market structure
The Non-life market is even more concentrated than Life: the top three insurers are sharing
64.7% (64.8% in 2013) of the market: PICC 33.5% (34.4% in 2013), Ping An 18.9% (17.8%)
and China Pacific 12.3 (12.3%), while the remaining 40 local players account for 33.1%
(33.9%) and 22 foreign players for only 2.2% (1.3%). Over the last four years, these market
shares have remained relatively stable. In the coming few years we expect the market share
of the top three players to remain about the same or slowly reduce as other players advance
and present higher direct competition or win new business. We also expect that foreign
insurers’ share will slowly increase, helped by improving distribution, brand awareness and
the liberalisation of regulatory rules.
10%
20%
30%
40%
0
200
400
600
800
2014201320122011201020092008
RMB Bn
Non-life GPW Non-life growth rate %
China’s Non-life insurance
market is highly
concentrated in the motor
business line

19.
Insurance
19
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
Ex. 19: China's Non-life insurance market: composition by top 3 players, other domestic players
and companies with foreign ownership (2011-14)
Source: CIRC, Dagong Europe
Products
The Non-life market is dominated by
motor insurance. According to our
analysis, based on the 9 largest
players covering 84% of total GPW in
2014, motor insurance accounts for
80% of their GPW. We estimate that
the overall market share of motor will
be slightly lower at 75%, but still very
significant. According to the CIRC
disclosure for 1H15, agricultural
insurance had 5.4%, liability 3.8%
and guarantee insurance 2.8%
market shares.
Note that in developing insurance
markets, including China, an over-weighted share of the motor line is quite common and
usually relates to mandatory motor insurance. Its share also usually gradually decreases,
offset by growth in other lines as the economy and industry develops.
Historically motor insurance growth has been driven by the evolution of the number of cars
for civilian use, which has jumped from virtually nothing 30 years ago to 83.1Mn18
at end-
2014, making China one of the largest passenger car markets in the world. However, the
number of passenger cars per capita stood at only 6 cars per 100 inhabitants in 201419.
This
is significantly lower compared to the US or Europe where the number of cars per 100
inhabitants was 38 and 49 respectively20
at end-2013. We expect motor to maintain its
dominance at least in the medium term, and to continue driving growth for the Non-life sector.
Historically, the motor third party liability (MTPL) sector has been open only for domestic
players, to protect local companies from more advanced foreign competitors. In our view this
has slowed down the overall market development. Only in 2012 did foreign insurers gain full
18
China National Bureau of Statistics
19
China National Bureau of Statistics - Statistical Communiqué of the People's Republic of China on the 2014 National
Economic and Social Development, http://www.stats.gov.cn/english/PressRelease/201502/t20150228_687439.html.
20
Dagong Europe – Industry Compass: Automotive 2015
350
450
550
650
750
0%
10%
20%
30%
40%
50%
60%
70%
20142013201220112010
RMB Bn
Top 3 domestic players % Other domestic players %
Companies with foreign ownership % Total Non-life GPW
Ex. 20: China's Non-life insurance GPW by business
line (2014)
Motor
80.4%
Property 5%
Liability 4%
Other 3%
Agricultural 2.9%
Health 2.3%
Accident 2.1%
Cargo & Transportation 0.9%
Engineering 0.1%
Source: Companies’ annual reports, Dagong Europe. Aggregated top 9
largest Non-life players by GPW (excluding China Export & Credit)

20.
Insurance
20
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
access to compulsory liability insurance for motor vehicle accidents and are still trying to build
critical mass.
The agricultural insurance sector is large and very important in China, with RMB 32.6Bn of
premium written in 2014 and 6.2% growth compared to 2013. It is also the world's second-
largest agricultural insurance market by premium income after the US. The main insurance
coverage was for rice, corn and wheat crops.
The sector has grown rapidly since 2007, boosted by a piloted subsidy program to support
farmers and stimulate the rural economy. After initial success, material annual subsidies from
the ministry of Finance (RMB 12.7Bn in 2013) followed, boosting the industry to its current
scale. Since then there have been a number of further regulatory changes, and in 2014 the
subsidy program was rolled-out across the country and the coverage of plants and livestock
has expanded.
Due to the sector’s importance to the world’s largest population, CIRC, the Ministry of Finance
and the State Council are strongly committed to further developing and supporting rural
communities and the development of agricultural insurance, in particular with the development
of national agricultural insurance platforms to enhance agricultural insurance information, and
promote and increase the awareness of agricultural insurance. We expect the industry to
benefit from these initiatives in terms of both growth and profitability.
However, there are still number of hurdles for the development of agricultural insurance,
including weak insurance awareness, high distribution costs due to remote locations and
difficult access, difficult claims management due to the generally small size of the average
farm and the lack of reliable data.
Catastrophe and climate-related insurance is still very low, despite China being prone to
earthquakes, floods, typhoons, droughts and other natural disasters. We expect this line to
grow faster in future, on both the insurance and reinsurance side, driven by government
initiatives and increasing awareness of high concentrations of risks in highly populated urban
areas.
Distribution
The major distribution channel for Non-life is direct. However, the efficiency per headcount is
low when compared with developed markets. Brokers and multi-agents are also playing
important roles, especially for foreign players with limited own-distribution capabilities. Despite
this, high commission rates are forcing insurers to focus more on cheaper direct distribution
channels. Telephone and internet sales platforms are growing fast. According to the CIRC,
the telephone channel took 14.6% and online took a 10.9% share of total motor premium. We
expect them to significantly increase their importance in the future.
Key trends and challenges
In June 2015 the CIRC initiated a pilot scheme for motor-pricing reforms, which aims to
modernise and move to a more risk-based pricing. Currently, motor policies pricing is derived
from the purchasing prices of new vehicles rather than the risk profile of the driver and frequent
claims history has little or no effect on insurance rates. In the first two months on this year the
average price of a policy in the pilot areas decreased by about 9%, however the number of
policies increased by about 17%.
We expect this reform to be beneficial for customers and allow better risk-based pricing.
However, we also expect pressure on profitability to increase as the margins are further
squeezed and competition intensifies.
Profitability
In 2014, overall Non-life industry profitably improved, largely driven my increased investment
returns. According to our analysis, based on the 9 largest Non-life players covering 84% of
Telephone and internet sales
platforms are growing fast:
the telephone channel took
14.6% and online took a
10.9% share of total motor
premium

21.
Insurance
21
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
total GPW in 2014, net income grew by 40% and reached RMB 30.6Bn, and helped to achieve
the strong return on equity of 14.4% and return on assets of 3.7%.
Ex. 21: China's Non-life insurance gross claims and gross loss ratios
Source: CIRC, Dagong Europe
Underwriting profitability was low with a net combined ratio of 99.1% compared to 99.2% in
2013. The loss performance improved slightly with a net loss ratio of 62.6% from 64.2% in
2013. However gains on improved losses were offset by an increase in expenses, which we
consider high by international standards, with a net expense ratio of 36.4%.
Overall gross claims ratio, based on aggregated market financials from CIRC, improved and
stood at 53% in 2014. However, the individual performance of the companies varies
significantly. Four out of nine companies from our sample accumulated losses in their capital
disclosure in 2014, indicating historically poor profitability.
Recently, CIRC published its
expectations regarding Non-life
profitability in 1H15, indicating
growth of about 149%, which we
believe is also investment-driven
and might be exposed to financial
market volatility.
Digging deeper, our sample analysis
revealed that motor and accident
insurance, despite high competition,
remain among the most profitable
lines (measured by underwriting
profit over GPW). Guarantee
insurance is very small, but also very profitable. Instead, health insurance is still loss-making.
Solvency
The Non-life industry is relatively well-capitalised according to the existing solvency regime
(similar to Solvency I in Europe). Based on our analysis of the top 9 companies, the weighted
average solvency ratio stood at 205% in 2014.
Solid bottom-line results in 2014 resulted in increased total shareholder’s equity, which stood
at 38.3% (31.8% in 2013) relative to Net Premium Written. We are yet to see if these
improvements can be sustained and how shareholders’ equity will be affected by turbulent
domestic financial markets.
0%
10%
20%
30%
40%
50%
60%
70%
0
100
200
300
400
500
600
700
800
2008 2009 2010 2011 2012 2013 2014
RMB Bn
Gross claims GPW Gross claims ratio %
Source: Dagong Europe, companies’ annual reports
Ex. 22: China's Non-life insurance underwriting
profitability by business line underwriting profit/loss
over GPW (2014)
-5%
0%
5%
10%
15%
20%

22.
Insurance
22
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
8. REGULATORY DEVELOPMENTS
Regulation is evolving, and gradually opening the market to encourage competition,
growth and wider social and economic development
China’s insurance market is regulated by CIRC, established in 1998. CIRC is focused on
monitoring market behaviour and developing the insurance market while, in our opinion,
protecting domestic insurance players. The market has been growing at an impressive pace,
and the significant growth spurs have usually been stimulated more by direct regulatory or
government actions rather than by market forces.
Complex rules, limited transparency, frequent changes and varying interpretation in different
regions continue to present significant challenges for market participants and investors.
However, we believe that the regulatory framework is slowly moving towards international
standards. CIRC is reforming the market at a slow pace, with pilot tests and careful
assessments of possible impact. However, as soon as the framework and impact are clear,
the pace increases. In recent years, we have seen a number of important reforms and a
gradual liberalisation of the country’s insurance industry.
The following is a high level summary of the most important regulatory milestones, which in
our view were achieved since mid- 2014:
 Since 1 June 2014: CIRC allowed all insurers, both foreign and domestic, to own more
than one company in the same segment of the industry. Prior to this insurers could own
only one company that competed in the same market segment (Life or Non-life). In
addition, investors are now allowed to take loans to finance up to 50% of acquisitions
instead of using solely their own funds.
 August 2014: The State Council issued Several Guiding Opinions Regarding
Accelerating the Development of Modern Insurance Services. It focuses on innovation
and development in the insurance industry and modernisation of the national
governance system and governance capacity. Overall, it shows strong a commitment to
further develop the insurance industry in China.
 August 2014: The Standing Committee of the National People’s Congress amended
the Insurance Law. The new law updates a number of areas, among which it liberalises
investment rules, raises the criteria for the majority ownership of insurance companies,
and expands the business scope of insurance companies.
In January 2015, CIRC published a press release describing its main regulatory focus for the
year:
Ex. 23: Summary of CIRC’s focus for 2015
Source: CIRC, Dagong Europe
The major reforms and actions achieved in 2015 fall within the focus areas. Below is a
summary of the most important ones:
• Commercial auto insurance premium-pricing reform
• Universal and participating insurance rate reform towards market-oriented rates
• Implementation of the second-generation pension schemes
• Use of insurance funds to continue to deepen market-oriented reforms
Introduction of
major reforms
• Accelerate the development of catastrophe insurance
• Accelerate tax benefit implementation for pension and health insurance
• Accelerate critical illness insurance policy implementation
Speeded-up
implementation of
important policies
• Promote compliance with insurance laws and regulations
• Establish Insurance-service and management-evaluation systems
• Continue improving existing regulation
Promote
development of
the industry
supervision
China’s insurance market is
regulated by CIRC: focused
on monitoring market
behaviour and developing
the insurance market

23.
Insurance
23
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
 March 2015: CIRC released the ‘Adjustment of Policies on Overseas Investments of
Insurance Funds’, which expanded the scope and flexibility for insurers’ investments
both domestically and abroad. It allows better investment diversification, asset liability
matching, investment returns and risk management. Among the changes, it has
expanded the investable foreign universe to 45 markets21
, 25 of which are developed
and 20 are emerging markets; it has permitted insurers to invest in Hong Kong’s Growth
Enterprise Market22
; and lowered the minimum credit rating for foreign fixed-income
investments to “BBB-” from “BBB”, aligning it with the international investment-grade
range.
 1H15: CIRC has set up a consortium for earthquake insurance for residential properties
in urban and rural areas. Non-life insurers operating for more than three years and with
solvency ratios above 150% are eligible to join.
 1H15: CIRC announced the set-up of a national information management platform for
agricultural insurance, to provide data services for insurance companies, supervisory
institutions and government departments in order to facilitate better industry
development.
 June 2015: CIRC started a pilot for the liberalisation of commercial auto-insurance policy
rates in six provinces and cities (Heilongjiang, Shandong, Guangxi, Chongqing, Shaanxi
and Qingdao). Insurers in the pilot areas can now price insurance policies and tailor
clauses according to the riskiness of the car owner, instead of uniform rates and clauses
as before.
 July 2015: CIRC released ‘Interim Measures for Regulating the Internet Insurance’,
effective from 1 October 2015. It is a first comprehensive rule-set to regulate the fast-
growing internet insurance business.
Note that one of the major developments over the last few years and probably for a few years
to come is the second generation solvency supervision system known as China Risk-Oriented
Solvency System (C-ROSS). It is widely anticipated that 2016 will be the roll-out year and
2015 has been very important for its preparation.
C-ROSS is a three-pillar framework similar to European Solvency II, with quantitative solvency
capital calculation (based on the insurer’s exposure to market and credit risks), qualitative
assessment and controls, and a market discipline and transparency-enhancing mechanism.
From what we understand, it is much simpler than the European SII, but a very significant
improvement on the current regime and solvency calculation, based on premiums and losses
only.
There are also a number of other initiatives and pilot projects focused on customer protection,
closer monitoring of insurance intermediaries, and setting up of industry databases, all aimed
at addressing important market-wide issues and encouraging industry evolution.
In our view, the overall trend of the regulatory changes is positive, but industry players and
regulators face many challenges ahead. We believe that to achieve faster industry
development and a better service to the population, with comprehensive coverage of
important economic risks, the regulator should: speed up market liberalisation; simplify and
standardise processes and rules; and align the rules for foreign and domestic players to boost
innovation, product development and healthy competition. In doing so it should work closely
with foreign regulators to implement best practices.
21
Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, Czech Republic, Denmark, Egypt, Finland, France,
Germany, Greece, Hong Kong, Hungry, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Luxemburg, Malaysia,
Mexico, Morocco, Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Russia, Singapore, Spain,
Sweden, Switzerland, South Africa, Taiwan, Thailand, Turkey, UK, and US.
22
Hong Kong’s Growth Enterprise Market is an alternative equities board operated by Hong Kong Exchanges and
Clearing.
China Risk-Oriented
Solvency System (C-ROSS)
should be rolled out in 2016

24.
Insurance
24
China’s Insurance Market Overview – Characteristics & Trends
15 September 2015
© 2015 Dagong Europe Credit Rating. All rights reserved.
9. APPENDIXES
Appendix 1: China’s insurance market GPW evolution (2008-14)
RMB Bn 2008 2009 2010 2011 2012 2013 2014
Total market GPW 978 1,114 1,453 1,434 1,549 1,722 2,023
Non-life GPW 234 288 390 462 533 621 720
Life GPW 666 746 968 870 891 943 1,090
Health GPW 79 80 95 103 125 158 213
Source: CIRC
Appendix 2: Key financial indicators of the top 3 Life & Non-life insurers (2014-12)
Life Non-life
RMB Bn 2012 2013 2014 RMB Bn 2012 2013 2014
Total assets Total assets
China Life (国寿股份) 1,898 1,970 2,227 PICC (人保股份) 268 319 366
Ping An (平安寿) 1,031 1,156 1,370 Ping An (平安财) 126 159 194
New China Life (新华) 491 566 644 China Pacific (太保财) 89 100 115
Total GPW Total GPW
China Life (国寿股份) 323 327 331 PICC (人保股份) 193 223 252
Ping An (平安寿) 129 142 169 Ping An (平安财) 99 115 143
New China Life (新华) 98 104 110 China Pacific (太保财) 70 82 93
Gross claims paid Gross claims paid
China Life (国寿股份) 75 139 109 PICC (人保股份) 109 133 145
Ping An (平安寿) 29 29 33 Ping An (平安财) 48 58 65
New China Life (新华) 8 9 17 China Pacific (太保财) 39 48 54
Net income Net income
China Life (国寿股份) 11 25 33 PICC (人保股份) 10 11 15
Ping An (平安寿) 8 14 17 Ping An (平安财) 5 6 9
New China Life (新华) 3 5 6 China Pacific (太保财) 3 3 1
Source: CIRC, Dagong Europe
DISCLAIMERS
NO CONTENT (INCLUDING CREDIT-RELATED ANALYSES AND DATA, VALUATIONS, OR OUTPUT THEREFROM)
OR ANY PART THEREOF (“CONTENT”) MAY BE MODIFIED, REVERSE ENGINEERED, REPRODUCED OR
DISTRIBUTED IN ANY FORM BY ANY MEANS, OR STORED IN A DATABASE OR RETRIEVAL SYSTEM, WITHOUT
THE PRIOR WRITTEN PERMISSION OF DAGONG EUROPE. DAGONG EUROPE DOES NOT INTEND TO ASSUME,
AND IS NOT ASSUMING, ANY RESPONSIBILITY OR LIABILITY TO ANY PARTY ARISING OUT OF, OR WITH
RESPECT TO, THIS CONTENT. THIS CONTENT IS NOT INTENDED TO, AND DOES NOT, FORM A PART OF ANY
CONTRACT WITH ANYONE, EITHER DIRECTLY OR INDIRECTLY. THE CONTENT SHALL NOT BE USED FOR ANY
UNLAWFUL OR UNAUTHORIZED PURPOSES.
RELATIONSHIP WITH ENTITIES OR INDIVIDUALS
DAGONG EUROPE DOES NOT HAVE A FIDUCIARY RELATIONSHIP WITH ANY ENTITY OR OTHER INDIVIDUAL
RECEIVING THIS RESEARCH. NOTHING IS INTENDED TO OR SHOULD BE CONSTRUED AS CREATING A
FIDUCIARY RELATIONSHIP BETWEEN DAGONG EUROPE AND ANY INDIVIDUAL OR ENTITY RECEIVING THIS
RESEARCH.
DAGONG EUROPE DOES NOT PROVIDE TO ANY PARTY ANY CONSULTANCY SERVICE, FINANCIAL ADVICE
OR LEGAL, AUDITING, ACCOUNTING, APPRAISAL, VALUATION OR ACTUARIAL SERVICES.
© 2015 Dagong Europe Credit Rating Srl (collectively, “Dagong Europe”). All rights reserved.

25.
Via dell’Orso 8, 20121 Milan Italy
Tel (+39) 02 72746011, Fax (+39) 02 72003544
www.dagongeurope.com