Insurers in Taiwan have become increasingly restless over the slow growth rates in the domestic insurance market in recent years. The country's insurance penetration rate -- the ratio of premium revenues to gross domestic product -- ranked third in the world at 14.5 percent in 2006, an indication of limited growth potential in the future.
In contrast, China's estimated insurance rate of 2.8 percent in 2006 and its per capita insurance premium revenue of 493 Chinese yuan leave ample room for growth, the report noted.
China's insurance market expanded rapidly in the first half of the decade, with life insurance premiums of 413.2 billion yuan at the end of 2006, 2.9 times higher than in 2000, and property and casualty insurance premiums of 150.9 billion yuan, 2.2 times higher than in 2000.
Chinese government estimates suggest that this growth should continue and even accelerate in the second half of the decade.
China's 11th five-year economic plan covering the insurance sector released in October 2006 estimated that premium revenues in 2010 would be double those in 2005, exceeding 1 trillion yuan, and assets managed by the industry would reach 5 trillion yuan, well above the 1.97 trillion yuan in assets managed at the end of 2006.
The plan also expected the insurance penetration rate in China to reach 4 percent by 2010.
Gaining a foothold in China's closed market, however, could be a major challenge for local insurers, the report said. China's life insurance market is still dominated by domestic players, with foreign operators having only a 6 percent market share.
And Taiwan's share of that is minimal, the report said. Taipei-based Cathay Life Insurance, Taiwan's biggest life insurer, had only 1.37 percent of the foreign share of China's life insurance market at the end of 2006, the report said.
To make inroads into China, local insurers have sought out partners there. Cathay Life has joined with China Eastern Airlines to set up a life insurance company in Shanghai, and Taiwan's Shin Kong Life Insurance partnered with Hainan Airlines to establish a life insurance firm based in Beijing.
Taiwan Life Insurance, meanwhile, is negotiating with Xiamen D&D Inc. to set up a life insurance venture in southern China.
Taiwan's insurers are being tempted by China's potential, even if they suffer losses there in their first few years of operations, because of the prospect of a stagnant market at home.
Taiwan's insurance penetration rate grew only marginally in 2006 to 14.5 percent, from 14.1 percent in 2005 according to the Directorate General of Budget, Accounting and Statistics (DGBAS), and premium income grew only 5 percent to reach US$51.6 billion in 2006.
The world's average penetration rate in 2006 was 7.5 percent.
