Chinese commercial banks will increase investment in life insurers in view of the strong growth potential in the Chinese insurance sector.
According to Moody's, the popularity of bancassurance and the benefit of diversifying their revenue sources are added incentives for banks.
The entry of banks into the insurance industry will have little immediate impact on the insurance industry's credit fundamentals, as in the near-term, large-scale investments by banks are not expected. However, Moody's anticipates that the business and financial profiles of those insurers with banks as majority shareholders would improve, since banks will have greater incentive to build long-term business relationships with insurers in which they have a majority stake. This will in turn help insurers expand their distribution reach more cheaply, and also benefit from association with banks' strong brands and existing branch networks.
Additionally, the capitalisation and solvency margin ratios of those insurers may strengthen due to the availability of new capital injections from stakeholder banks. Banks, especially the large ones, generally have strong capital bases and the size of banks' target insurers are usually small relative to banks' capital.
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