Financial institutions, including banks, insurers, securities brokerage and trust companies will compete for the second batch of corporate annuity licenses, according to China Business Post.
On May 15, Taikang Life Insurance Company got the nod from the China Insurance Regulatory Commission (CIRC) to make preparations for setting up a pension insurance company. The new company will be registered in Beijing with a registered capital of 200 million yuan (US$25.87 million).
Changjiang Pension Insurance Company, another specialized pension insurer in China, which was approved by the CIRC last month, began operations on May 19.
The CIRC's move to approve more specialized pension insurers will allow more financial institutions to get corporate annuity licenses.
The regulatory body also had started checking the applications of the second group of corporate annuity management institutions as of May 21 and will announce the approved list in August.
Statistics from the Ministry of Labor and Social Security show that the corporate annuity fund, which covers 9.64 million people, had 91 billion yuan in assets at the end of 2006, but only 15.8 billion yuan was handled by professional investors, such as endowment insurance companies, commercial banks and other qualified investors.
By the end of this year, after a further 75 billion yuan (US$9.62 billion) has been transferred to qualified investors, the whole fund will be in their hands.
Currently, a total of 30 financial institutions, including insurers, securities brokerage and trust companies, are able to act as pension fund custodians, trustees, asset managers and bookkeepers in corporate annuity management. But the number is not enough for the 75 billion yuan in assets and expanding corporate annuity markets.
Statistics show that, seven institutions, including Ping'an Pension Insurance Co Ltd, Pacific Annuity Insurance Company, China Life Insurance Co Ltd, and Industrial and Commerce Bank of China obtained two out of the four licenses for annuity management. For example, China Merchants Bank is both a pension fund custodian and a bookkeeper.
These institutions take care of the respective links in annuity management. Such a long management chain is costly and lowers the efficiency of supervision.
"The system is inefficient for making use of resources and increases the costs of management and operations," said Zhao Weixing, general manager of Ping An Pension.
"The regulator should approve qualified institutions with more licenses, which is better for operating one-stop services. We have submitted the application for the other two licenses," Zhao added.
A CIRC official also said the inefficient management system also slowed down the development of China's corporate annuity market. "CIRC will adjust the current management system and integrate institutions' licenses," he said.
Foreign insurers are also allowed to provide annuity products, as part of China's commitments to the World Trade Organization. Many overseas banks and joint venture insurers, such as the Hongkong and Shanghai Banking Corporation, Citibank, Generali China Life Insurance Co Ltd and AEGON-CNOOC Life Insurance Co Ltd, have intentions to tap the lucrative market.
"China's corporate annuity market is still in its fledging stages. All the systems are fresh. Only a few enterprises have established corporate annuity and the taxation policies are still improving, putting overseas and Chinese insurers on an equal footing," explained a general manager of an overseas insurer.
Insiders say that allowing foreign financial institutions to operate corporate annuity will trigger more intense competition, as they are more experienced in the area. For example, AEGON, AEGON-CNOOC Life's foreign partner, is well-known in the corporate annuity field in the United States.
Some qualified financial institutions began mapping out new corporate annuity plans and intend to target small- and medium-sized enterprises (SMEs) whereas before they serviced only large-sized enterprises before such as telecom, petroleum and chemical giants.
Statistics show that corporate annuity business focuses on profitable sectors such as electricity, information technology, petroleum, manufacturing, tobacco and transportation sectors. They are concentrated in China's economic booming areas including Guangdong, Zhejiang, Jiangsu and Liaoning provinces and Qingdao and Shenzhen cities.
But China's corporate annuity market recorded modest profits in recent years. "Large-sized enterprises are able to give competitive prices,¡± said a commercial bank source. In order to obtain more business, we must offer a lower price, and some other financial institutions have to provide additional preferential policies. "
"We are actively studying the investment management on SMEs' annuity," said a source with China Southern Fund Management Co Ltd. "On the premise of abiding by laws and regulations, our company is considering a way to collect SMEs' annuity and then establish a fund for investment."
Source:chinadaily.com.cn |
