Revenues for China's insurance industry surged 45 per cent year-on-year in 2002 to reach a total of Yn305.3bn, Business Post reported. However, profits were just Yn15.9bn on total capital of Yn579.9bn, representing a return of 3.1 per cent, down from 2001's rate of 4.3 per cent. The figures were announced by Wu Dingfu, chairman of the China Insurance Regulatory Commission.
The rise in revenue was attributed to increased demand for private insurance after the withdrawal of welfare benefits for state employees. The decline in profitability was due to restrictions on the ways in which insurance companies are allowed to invest their funds – basically in bank deposits, treasury bonds and stock market funds, though not in stocks themselves. Consequently, insurers have been hit badly by the low level of bank interest rates over the past 10 years.
To avert the threat to firms' repayment abilities, the commission has set up a special committee to consider ways of dealing with problems caused by the growth in income and the falling rate of return. It had already simplified the approvals procedure for companies investing in stock market funds. However, firms were warned that they would have to find their own ways to improve capital management and to separate investment from the collection of premiums.