China Non-Life Insurance stable in Q1: Fitch Ratings

Aggregate comprehensive solvency ratio of the Chinese non-life insurance sector remained high at 238%.

The growth of Chinese non-life insurers remained steady in the first quarter of 2023 following the lifting of COVID-19 containment measures in China, said Fitch Ratings in a report.

Most major non-life insurers reported favourable underwriting margins, contributing to stable growth.

Despite the implementation of the stricter second phase of the China Risk-Oriented Solvency System (C-ROSS) framework, the aggregate comprehensive solvency ratio of the Chinese non-life insurance sector remained high at 238% at the end of 2022. This level is well above the regulatory minimum of 100%.

In 2022, most motor insurers experienced an improvement in underwriting margins due to better claim ratios resulting from COVID-19-related social distancing measures. 

In the first quarter of 2023, major non-life insurers reported a stable combined ratio, which was driven by strong growth and efforts to enhance their cost structures.

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In the first quarter of 2023, insurers benefited from steady returns from fixed-income-type investments, which helped to reinforce their operating margins. However, many smaller insurers still faced challenges in sustaining positive underwriting margins due to their scale disadvantage.

Insurers' margins are not expected to be significantly affected by additional increases in motor pricing flexibility in 2023.

The revised pricing rules will incentivize motor insurers to improve their pricing sophistication and segmentation. Under the new rules, insurers can offer lower premium rates to higher-quality customers while charging higher rates to those with poor accident records. 

In January 2023, the regulator announced that insurers would be permitted to expand the pricing range when determining commercial motor premiums.