The China Insurance Regulatory Commission (CIRC) - watchdog of China's insurance industry - last week announced Netherlands-based ING and Italian-based Generali have been granted licences to operate in life insurance in China. The move is seen as China's first step towards fulfilling promises made during World Trade Organization (WTO) bargaining to deliver seven licences to European insurers. Candidates are queuing up to join China's indemnity market, the newest yet perhaps the most promising market in the

world due to its huge population base.

Insurance in China is still under rigid government control, with only a select few big foreign names being considered for access to the industry.

An agreement was made during Sino-EU WTO negotiations last month in Beijing that seven European insurers would be invited into the market within three months after the WTO agreement signed between China and European Union.

Five other European companies, including three life insurers and two property insurers, are expected to be named for joint venture insurance business in China before the end of this month or in the early part of next month.

But other eager hopefuls, including the Netherlands-based Aegon Co, French-based CNP Assurance, and Standard Life and CGNU Insurance of Britain, also want to get a foot in the door.

A sure thing

Every insurance company in the running is confident it will succeed.

"Competition is fierce, but we are very confident that we will be the winner," said a company officer of CGNU Beijing Representative Office, adding his company has been canvassing for approval for a licence for a long time.

The largest insurance company in Britain, CGNU is among the earliest of foreign insurers with a presence in the Chinese market. It set up its Beijing office in 1994 and now also operates offices in Guangzhou, capital of South China's Guangdong Province, Chengdu, capital of Southwest China's Sichuan Province, and Shanghai.

The company claims it has helped smooth the growth of China's insurance industries by educating local insurers.

"We have provided many training programmes for domestic insurers and the industry's regulators," the company officer said. He is convinced that this, together with the $100 million investment CGNU has in China's B-share market, makes granting of a licence for the company a sure thing.

A senior management representative with Standard Life Insurance Shanghai Office is no less certain that his company's application will be accepted.

Catherine Zhu, a local employee of the company's representative office was equally sure: "We believe that the date when we can begin business is not too far off," she told Shanghai Star.

But the same companies were not so outspoken on the subject of which Chinese partners they may make alliances with or in which cities they would make their business debut.

"We are in contact with a number of potential partners, but it is still too early to say which will be our final partner," said Nan Tao, chief representative of CNP Insurance, adding their joint venture would likely be launched in one of six Chinese coastal cities.

Only certain designated Chinese cities are currently permitted to conduct business in life insurance. These include Shanghai, Beijing, Dalian, Shenzhen and Guangzhou.

Domestic insurers shape up

Chinese counterparts in the insurance sector remain calm about the expected inflow of foreign rivals.

"I do not think the presence of foreign competition will be life-threatening for us if we continue our efforts to further reform and improve services," said Shi Jierong, vice-president of the Shanghai-based Pacific Insurance Co.

The company now accounts for some 15 per cent of the domestic property insurance market. And it plans to go public before the end of the year.

Shi pledged his company will improve services and implement more customer-oriented policies.

Chen Poujian, chairman of Tian'an Insurance Co, also claims his firm will thrive after WTO accession backed by better management expertise and innovative ranges of services and policies.

Tian'an has just become the first domestic insurance firm to pass the ISO9002 quality control inspection. Its new qualification paves the way towards future access to the world market.

Wilhelm Zeller, chairman of the executive board of the Hannover Re Group - one of the largest re-insurance companies in the world, suggests China should encourage the establishment of more insurance companies rather than imposing unbending control over the industry's growth.

"Rewards will grow as the market expands; proper competition will help the market to boom," said Zeller.

There are now 16 insurance companies competing in the Shanghai market, among which nine are joint ventures or wholly owned foreign firms.

Other domestic players are improving services to meet the challenge of the WTO.

Late last year the Shanghai Branch of Shenzhen-based Ping'an Insurance Co debuted a range of investment-linked products which was instrumental in its attaining the lion's share of the Shanghai market last year.

Sinochem-Manulife Co, China Life Co and AIA (American International Assurance) also launched dividend products in Shanghai early this year.