Fitch has maintained a stable rating outlook for Chinese non-life insurers over the next 12 months.
Fitch has said China's non-life insurance sector is stable and its outlook reflects the expectation that growth dynamics are likely to be stronger in 2021, given the ongoing recovery of economic activities despite the coronavirus pandemic.
Fitch expected the sector to maintain healthy solvency adequacy to support underwriting activity and to cushion against asset volatility.
“We expect the non-motor business to continue to report faster growth dynamics than the motor insurance class. Implementation of comprehensive motor insurance reform is likely to impair smaller insurers’ ability to boost profitability, while scale advantage will enable the large peers to sustain profitable underwriting results,'' said Fitch in the rating note..
Non-life operators will continue to rely on reinsurance to alleviate losses from catastrophe events. A stable yield from fixed-income securities will contribute to earnings stability.This reflects solid capital strength to withstand potential volatility from underwriting and extreme movements in equity markets. Insurers’ exposure to ‘risky assets’ is likely to remain tolerable, explianed Fitch..
“Motor insurance reform could suppress underwriting margins, while we expect most insurers to maintain healthy liquidity to support the cash outflows associated with their ‘short-tailed’ insurance liabilities,'' said Fitch.