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02601 CPIC
RTNominal up25.750 +0.300 (+1.179%)
Research Report

28/11/2019 17:06

Stable outlook seen for Chinese P&C insurers in 2020

[ET Net News Agency, 28 November 2019] Moody's Investors Service said in a new report
that diversifying business growth, stable profitability and strong risk-based
capitalization support its stable outlook for China's property and casualty (P&C)
insurance industry in 2020.
However, fast growth in unseasoned non-motor lines and potential acceleration in motor
pricing liberalization pose key risks.
"China's P&C insurers continue to record strong growth in their non-motor lines, led by
health, agricultural and liability insurance, which is bringing benefits in terms of
product diversification, but will also test underwriting discipline," said Kelvin Kwok, a
Moody's Analyst.
"However, profitability will remain supported by stable underwriting results and steady
investment income. Specifically, motor line profitability will be balanced between a
significant drop in acquisition expenses from tighter commission practices and higher loss
ratios from premium liberalization," added Kwok.
The industry's capitalization remains strong, with a comprehensive solvency ratio of
279% at the end of June 2019, the highest level since 2016 and well above the regulatory
minimum. This also positions the industry well to adapt to the second phase of China's
Risk Oriented Solvency System (C-ROSS), which Moody's expects will feature higher and more
risk-aligned risk charges.
Moody's expects individual insurers to make adjustments ahead of the second phase of
C-ROSS, from changes in growth strategies to reinsurance purchases to reduce the impact on
their capitalization.
The industry has also moderated its allocation into alternative investments, alleviating
erosion risk from potential impairments.
Industry outlooks reflect Moody's view of fundamental business conditions for an
industry over the next 12-18 months. Since outlooks represent Moody's forward-looking view
on business conditions that factor into its ratings, a negative (positive) outlook
suggests that negative (positive) rating actions are more likely on average. (KL)

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