Underwriting woes to plague Chinese non-life insurers into 2021

Both motor premium value and underwriting were hit by the motor insurance reform.

Chinese non-life insurers will continue to see weak underwriting margins in 2021, according to a Fitch Ratings report, notwithstanding a rebound in economic activity.

The segment’s motor premium volume and underwriting margin were both hit by the comprehensive motor insurance reform carried out in September 2020, with loss ratio from the motor business jumping to 71% for the six months after the implementation.

A lower expense ratio caused by a decline in commissions and administrative costs could ease higher motor incurred claims, the report said.

As a result, insurers continue to focus more on non-motor policies as earnings stability relies heavily on their capability to cope with underwriting risks connected to the non-motor segment, Fitch added.

The sector’s investment focus on shorter-term fixed-income instruments supported most of the operating performance in 2020, offsetting volatile underwriting earnings.