Shanghai intl reinsurance exchange on fast growth track

In its first eight months of official operations, the Shanghai International Reinsurance Exchange traded nearly 4.4 billion yuan ($617.87 million) of insurance premiums, according to an official with the exchange.

The value of outward insurance, under which the insurer transfers the insurance to another insurance company, approached 94.6 billion yuan, while the value of inward reinsurance, meaning the insurance company accepts insurance business ceded by another insurer, totaled 9.5 billion yuan, said Chang Ming, the exchange's assistant to the general manager.

Officially unveiled in the Lin-gang Special Area of the China (Shanghai) Pilot Free Trade Zone in October, the exchange has seen 118 institutions registered with trading rights, among which 90 are domestic and the rest from overseas. The exchange has helped to attract 26 domestic and international reinsurance institutions to settle down in Lin-gang, including operation centers of 21 reinsurance companies, one branch of a reinsurance company, and branches of four insurance brokerages.

Chang said that such rapid development in less than a year can be largely attributed to the institutional innovation first attempted there, the trading seats introduced at the exchange being one of them.

Overseas institutions are allowed to provide offshore reinsurance services to Chinese clients even if they have not acquired official operational approval from the Chinese central regulators. Under such circumstances, the overseas reinsurance companies cannot set up fixed operation venues in China, Chang said.

The trading seats at the exchange can help those institutions reach their Chinese clients more conveniently, while significantly reducing the costs of conducting China-related businesses, he said.

As of late, six overseas institutions from the United Kingdom, Barbados and the Democratic Republic of the Congo, among others, have obtained trading seats at the exchange.

The exchange has also jointly explored an overseas fleet insurance service mechanism with Commercial Aircraft Corp of China, PICC and Air Union Insurance Brokers, which is aimed at facilitating the export of domestically produced commercial aircraft while securing Chinese companies' interests in overseas markets, Chang said.

Feng Xiao, deputy general manager of the reinsurance department of PICC, said that Chinese companies' demand for insuring their overseas businesses has been rising amid China's stable economic growth and the deepening of the Belt and Road Initiative.

Therefore, domestic insurers need to directly enter the international market and undertake the inward reinsurance business of Chinese companies in overseas markets as well as other international inward reinsurance. This is crucial for China to participate in the global risk governance, he said.

As Chang further explained, trading data at the exchange are transparent, true, traceable and controllable. Based on these merits, the People's Bank of China, the country's central bank, has provided facilitation for cross-border capital registered at the exchange and used for reinsurance trading via free trade accounts.

The PBOC is now studying the introduction of a new measure to facilitate overseas investment using overseas inward reinsurance income, he said.

France's AXA Global Reinsurance officially opened its reinsurance operation center in Lin-gang in January.

According to Xue Fei, general manager of AXA International Reinsurance (Shanghai) Co Ltd, the collective financial infrastructure and policies introduced at the exchange — as well as the gathering of registration, clearance and information disclosure functions there — can largely improve trading efficiency and lower costs. This is conducive to improving companies' operational efficiency and competitiveness, he said.

The fact that more and more industry players are gathering in Lin-gang helps AXA to talk to its peers more conveniently over the most up-to-date trends regarding health insurance, travel insurance and even businesses related to new energy vehicles, he said.

The Lin-gang administrative committee released the negative lists and practice guidance for the cross-border data flow in the reinsurance industry in February and May, respectively.