VZCZCXRO4240
RR RUEHCN RUEHGH
DE RUEHBJ #7535/01 3520910
ZNR UUUUU ZZH
R 180910Z DEC 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 4075
RUCPDOC/USDOC WASHDC
INFO RUEHCN/AMCONSUL CHENGDU 8873
RUEHGZ/AMCONSUL GUANGZHOU 3713
RUEHHK/AMCONSUL HONG KONG 9897
RUEHGH/AMCONSUL SHANGHAI 8753
RUEHSH/AMCONSUL SHENYANG 8525
RUEHIN/AIT TAIPEI 6770
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 BEIJING 007535 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM SECOR/YAMAMOTO 
STATE PASS USTR STRATFORD/WINTER/MAIN 
USDOC FOR ITA/MAS/MARINACCIO 
 
E.O. 12958: N/A 
TAGS: ECON ETRD WTRO EFIN EINV CH
SUBJECT: GUANGZHOU INSURANCE CONFERENCE NOV. 28-29 
 
(U) THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED. 
PLEASE HANDLE ACCORDINGLY.  NOT FOR DISTRIBUTION 
OUTSIDE USG CHANNELS. 
 
¶1. (SBU) Summary.  Participants at the 8th annual China 
Rendezvous Insurance Conference in Guangzhou November 
28-29 discussed insurance challenges in the China 
market for foreign insurance and reinsurance companies. 
Industry participants lamented the lack of insurance 
product awareness among the populace, poor perception 
of insurance, difficulty in opening branches, 
inability to make concurrent branch applications, 
discriminatory reinsurance regulations, and 
restrictions on foreign firms hoping to enter the auto 
insurance and political risk insurance markets.  End 
Summary. 
 
------------------------------- 
100 Percent Penetration by 2020 
------------------------------- 
 
¶2. (SBU) During the two-day conference, China 
Insurance Regulatory Commission (CIRC) Commissioner of 
Guangdong Province Huang Hong said CIRC's objective is 
to get insurance penetration to all households and 
individuals in China by 2020.  He noted the need to 
use "Chinese characteristics" to develop the insurance 
industry, but did not elaborate further as to which 
specific steps CIRC was planning to take in 
accomplishing its objectives.  Several industry 
participants emphasized the need to increase insurance 
product awareness among the populace and called on 
CIRC to play a lead role.  One of the organizers of 
the conference suggested CIRC adopt an "Indian" model 
and employ innovative strategies like sponsoring 
popular sporting events and utilizing radio, audio- 
visual media, and music concerts to boost awareness. 
 
¶3. (SBU) Chairman of the Guangdong Insurance 
Association and General Manager of China Life, Zheng 
Dong, said CIRC and the Ministry of Education had 
recently published a notice stating that insurance 
would be taught at the secondary school level. 
However, participants emphasized that this has not 
happened yet and doubted when the Ministry of 
Education and CIRC could make it happen. 
 
---------------------------- 
Poor Perception of Insurance 
---------------------------- 
 
¶4. (SBU) Sino Life Insurance Company Liaoning Branch 
General Manager Li Qiu discussed the challenge of 
reducing poor perception of insurance, particularly 
that of insurance agents, as an important step in 
increasing insurance product penetration among Chinese 
households.  He emphasized that lack of professional 
training, lack of transparency, limited product choice, 
and lack of consumer education all contributed to this 
negative perception.  The average Chinese household 
continues to view insurance in terms of a "cost" as 
opposed to a "savings" product, he stressed. 
 
¶5. (SBU) In response to Li's remarks, several foreign 
insurance and reinsurance firm representatives 
suggested that tax incentives at both the personal and 
corporate level would not only reverse this trend, but 
also encourage the development of private pensions.  A 
favorable tax environment would also benefit the 
development of the health care insurance market, they 
argued. 
 
----------------------------------------- 
Market Access Concerns - Opening Branches 
----------------------------------------- 
 
¶6. (SBU) Foreign insurance and reinsurance company 
representatives noted that foreign firms do not have 
sufficiently established insurance brands in China yet. 
One of the challenges in establishing a brand is first 
 
BEIJING 00007535  002 OF 003 
 
 
establishing a branch office in China.  Vice President 
and General Manager of the Hong Kong branch of 
Transatlantic Reinsurance Company, Peter Ho Kin Chung, 
said their firm had applied to open a branch in 
Beijing three times, since 2001, but each time had 
been refused by CIRC without receiving a complete 
written notice of the reason for refusal.  Ho Kin 
Chung stated Transatlantic submitted an application 
for branch approval in August, 2007 but given previous 
refusals, Transatlantic would like United States 
Government assistance in advocating their case. 
Without a branch office, United States firms like 
Transatlantic Reinsurance Company cannot conduct 
underwriting business services and are effectively 
shut out from doing reinsurance in Mainland China. 
The cumbersome process of opening a branch in China, 
coupled with the inability to concurrently apply to 
open multiple branches, restricts foreign insurance 
firms from entering the market, industry participants 
said. 
 
¶7. (SBU) Singapore Reinsurance Corporation 
representatives noted the advantages domestic firms 
have in selling insurance products.  Singapore 
Reinsurance Corporation Shanghai Representative Office 
Chief Representative Wilson Wu, for example, noted the 
extensive network of China Life, China's largest 
domestic insurance company, with a vast distribution 
network to sell insurance products through more than 
10 commercial banks at over 90,000 branches, as well 
as through postal savings institutions.  Foreign firms 
have limited distribution channels as CIRC continues 
to implement regulations that benefit state-owned or 
state-controlled reinsurance companies, Wu said. 
 
-------------------------------------- 
Discriminatory Reinsurance Regulations 
-------------------------------------- 
 
¶8. (SBU) Marsh Insurance Company representatives also 
noted that CIRC's October 28, 2005, "Regulations on 
Administration of Reinsurance Business" continues to 
favor state-owned or state-controlled insurance 
companies with respect to reinsurance cessions. 
CIRC's November 28 "Notice Concerning Issues Relating 
to the Security of the Reinsurance Business," 
effective January 1, 2008 does not eliminate the 
requirement that foreign insurance companies must 
first offer reinsurance to at least two local Chinese 
reinsurance companies. 
 
¶9. (U) Industry analysts point to Articles 11 and 22 
in the 2005 "Regulations on Administration of 
Reinsurance Business" that discriminate against 
foreign reinsurance companies.  Article 11 states that, 
when arranging treaty and facultative reinsurance, 
primary insurers should send out reinsurance 
invitations to at least two professional licensed 
insurance companies located in China prior to offering 
the business to foreign firms located outside the 
People's Republic of China.  Article 22 states that, 
unless otherwise approved by CIRC, foreign insurers 
shall not have reinsurance business with its 
affiliated overseas companies.  According to foreign 
reinsurance company representatives, both articles are 
meant to protect China Reinsurance Company's monopoly 
over the reinsurance business. 
 
--------------------------------------------- --------- 
Restricted Markets - Auto and Political Risk Insurance 
--------------------------------------------- --------- 
 
¶10. (SBU) While auto insurance premiums account for 70 
percent of China's general insurance market, foreign 
firms are restricted from underwriting mandatory third 
party liability (MTPL) auto insurance in China, 
effectively shutting them out from the auto insurance 
market.  In addition to MTPL, no foreign insurance 
company has received approval from CIRC to provide 
political risk insurance (PRI) coverage for Chinese 
 
BEIJING 00007535  003 OF 003 
 
 
companies.  According to industry analysts, China 
Export and Credit Insurance Corporation (Sinosure), 
jointly administered by CIRC and MOF, and wholly owned 
by the Chinese government, is currently the only 
insurer allowed to sell political risk insurance in 
China for non-domestic exposures.  Foreign insurance 
company representatives told Econoff that these 
restrictions are in place to ensure People's Insurance 
Company of China (PICC), China Pacific Insurance 
Corporation (CPIC), and Ping An's dominant position in 
the MTPL auto insurance market, while protecting 
Sinosure's monopoly in the PRI market. 
 
--------------------------------------------- -- 
Tianjin as National Insurance Experimental Zone 
--------------------------------------------- -- 
 
¶11. (SBU) CIRC and the Tianjin government jointly 
issued an "Opinion on Accelerating the Innovation 
Development of Insurance Reform Experimental Zone in 
Tianjin Binhai New Area" on November 21.  One of the 
promoters of the ntional experimental zone in Tianjin, 
Bohai Insurance Vice General Manager Qi Zhi Qiang, 
stated that all major national insurance reform 
measures would be tried out first in Binhai.  He said 
Tianjin Binhai was chosen because of its specific 
geographic location.  The Binhai New Area consists of 
a 2,270 square kilometer of land along the coast, 
complete with a free trade zone, a financial street 
and one of China's largest bonded port areas.   Other 
industry analysts, however, believe Tianjin was chosen 
because the Mayor of Tianjin, former central bank 
governor Dai Xianglong, is one of President Hu 
Jintao's friends.  As for insurance reform measures 
that Binhai will implement, Qi did not offer any 
specific examples.  Most conference participants 
confided that it is too early to determine whether the 
new experimental zone would be a success or failure. 
 
----------------------- 
Conference Participants 
----------------------- 
 
¶12. (U) Conference Participants included: Secretary 
General of the People's Government of Guangdong 
Province Li Han Dong, CIRC Commissioner of Guangdong 
Province Huang Hong, and 330 delegates from various 
domestic and international insurance and reinsurance 
companies and related firms.  The November 28-29 two- 
day conference was organized by China Reinsurance 
Company and Singapore Reinsurance Company. 
 
Randt