In Xu's opinion, after the insurance market gradually opened up, the Chinese insurance industry introduced advanced foreign training mechanisms of actuaries and some professional examinations and qualification certifications, making the Chinese insurance market closer to that of international practice.

New financing channels

After AIA started its business in Shanghai in 1992, Morgan Stanley and Goldman Sachs purchased shares of Ping An Insurance Co. in 1994, making them the first foreign capital entering China's insurance market by buying shares.

At present, the largest shareholder of Ping An is Hong Kong and Shanghai Banking Corp.; the largest shareholder of New China Life Insurance is Zurich Financial Services Group from Switzerland; and the largest shareholder of Taikang Life Insurance is Swiss Life. There are many other similar cases. Figures from the CIRC indicate that by the end of 2005, 17 Chinese insurance companies had foreign shareholders.

"Since the insurance market is opened, there has been over 60 billion yuan ($7.59 billion) worth of overseas capital coming into China by way of establishing foreign-funded insurance companies or buying shares of Chinese insurance companies, driving development of the Chinese insurance industry," said Meng Zhaoyi, Director of the CIRC International Department.

Among the paid-in capital of PICC Property and Casualty Insurance Co. Ltd. and China Life Insurance Co. Ltd., which are listed overseas, 10 billion yuan ($1.27 billion) is foreign capital, according to CIRC figures.

"In the future, foreign capital may focus on the insurance agency market, which is slated to open further," Meng said. "This will bring more pressure to Chinese financial institutions. Meanwhile, we will actively expand international insurance supervision cooperation and strengthen supervision over cross-border insurance transactions."

"We have now seen the services and performance of foreign-funded companies," said Hao Yansu, Dean of the Insurance Department of Central University of Finance and Economics. "Their training and their management attitude toward products make the Chinese insurance industry learn much and advance faster. After 2006, the Chinese insurance market should be more open to facilitate foreign-funded companies. It might be good news to the Chinese insurance industry, and to the Chinese people."

Insurance Industry Highlights in China

- Within five years after China entered the WTO, China had fulfilled its commitments and opened the insurance industry. However, foreign-funded property insurance companies cannot offer motor vehicle third party liability insurance. Joint ventures also must be adopted if foreign investors plan to establish life insurance companies in China. Foreign capital must hold shares of no more than 50 percent.

- According to the latest CIRC statistics, among the 89 insurance companies in China, half are foreign-funded ones. There are 47 foreign insurance companies from 15 countries or regions with 121 operating institutions in China with total assets of 20.77 billion yuan ($2.63 billion), accounting for 31.4 percent of the total assets of all foreign-funded enterprises in China. Major transnational insurance groups in the world and insurance companies in developed countries have entered the Chinese market. China has become one of the most important emerging insurance markets in the world.

- From January to October 2006, premiums of foreign-funded insurance companies totaled 19.11 billion yuan ($2.42billion), with a market share of 4.07 percent. In Beijing, Shanghai, Shenzhen and Guangdong, which were opened ahead of other regions with more concentrated foreign capital, foreign-funded companies hold 18.15 percent, 18.62 percent, 10.73 percent and 9.68 percent of the market, respectively.

- Foreign-funded insurance companies are encouraged to establish operating institutions in the central, west and northeast areas of China. Qualified domestic joint stock insurance companies are allowed to introduce foreign capital.