China’s marine market facing swells

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China’s shipping industry has received significant government investment in recent years as the country seeks to become the pre-eminent nation in the global marine market. The country’s economic growth has been heavily publicised in the last decade, and with projects such as the Belt and Road Initiative (BRI), there is a lot on its plate. Part of the investment in the shipping industry saw notable investment in the marine insurance space, but the moves to make China – and Shanghai in particular – a hub for the specialist class of business have seemingly failed. According to AM Best, China’s ambitious plans to grow its marine insurance sector have slowed due to its economic problems, increased competition and subdued trade activity. However, the country’s insurance sector is now utilising China’s ambitious foreign economic development initiative to generate growth, said the ratings agency. Cargo insurance accounted for 1.3% of the China’s total property and casualty gross premium written in 2014. Hull insurance represented 0.7% of China’s total market P&C gross premium. That made it the largest cargo insurance market in the world, and the second largest hull market in the world. More recent figures published during the recent International Union of Marine Insurance (IUMI) annual conference in Cape Town show the cargo market generated some $16.1bn of premium in 2017, and China represented 9.6% of that total, equal to $1.55bn. IUMI’s numbers show hull premium across the world amounted to $6.9bn in 2017, with China representing 10.6%, or $730m, of it. BRI is just one of many projects that China is relying to be a new source of premium as current insurance penetration is at a mere 1%. The BRI involves construction and infrastructure projects designed to link up China’s One Belt Road initiative. The mega project aims to boost China’s trade ties with neighbouring countries and further strengthen its economy. The BRI, which is estimated will cost $900bn according to Fitch Ratings, will see China construct road and other infrastructure that connects the country to its neighbours including Russia, Pakistan, India, Bangladesh and other Association of Southeastern Asian Nations (ASEAN), countries. Schemes already announced include a controversial port and pipelines in Pakistan, railway stations in Russia, dry ports in Kazakhstan, and bridges in Bangladesh. With this project, the Chinese government said aims to create a new ‘era of globalisation’ all with what it calls a “modern Silk Road” trading route. “With the One Belt One Road initiative we anticipate more opportunities for ports and terminals infrastructure,” Pierre Chevalier, head of marine hull Asia Pacific, Allianz Global Corporate & Specialty SE, told Reactions. In addition, government policies could spur the growth of China’s marine insurance industry, says AM Best. The government is introducing tax benefit incentives on air cargo, marine cargo, marine liabilities and marine sectors, which will encourage marine insurers to use Shanghai as the base of their marine business. This is supported by the fact that Shanghai boasts the number one shipping port globally. However, growth of the sector will also require that positive operating performance and long-term sustainable, prudent underwriting practices, appropriate coverage terms and sufficient risk management. Chevalier added: “China has a large domestic market but it is not considered a major placement hub for non-Chinese... CLICK HEADLINE TO READ MORE

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