FORMER CHINA RE BOSS CALLS FOR CAPITAL INJECTION

The former president and chairman of China Re has called for the National Bank of China to provide the reinsurer with a capital injection so that the reinsurer can compete with foreign reinsurers making inroads on the Chinese reinsurance market. Dai Fengju put forward the proposal during the fourth session of the 10th National People’s Congress held from March 3 to 13. Because of China’s World Trade Organisation agreements, China Re lost its compulsory reinsurance advantage on January 1 and is currently restricted to about 20bn yuan in reinsurance capacity. However, China’s insurance premiums reached 500bn yuan in 2005, with reinsurance premiums totalling 21.5bn yuan. Mr Dai said that a capacity of 100bn yuan for China Re would be more suitable. He suggested the state lead a financial restructuring in China Re by injecting capital and converting it to a joint-stock company. Mr Dai also noted that China Re’s capital restrictions made it hard to cover larger projects such as subways, tunnels and aviation, meaning that domestic insurers were turning to the much larger capitalised Munich Re, Swiss Re and Cologne Re, which have already opened branches in China’s major cities. Lloyd’s obtained a licence last November, reinsuring renminbi-denominated policies via local brokers.