Asia

S&P reduces risk rating for China life sector

Rating agency Standard & Poor's has marginally revised its risk rating for China's life insurance sector from ‘very high’ to ‘moderately high’ despite the continued need for improvement in most Chinese life companies’ operational management. S&P referred to the improvement in the financial strength of some of the bigger Chinese companies in the market. The agency said that these companies managed to increase their market share at the same time as maintaining profitability. S&P cited other positive factors as improved regulatory controls and the increased presence of foreign investment. S&P maintained its ‘high risk’ rating for China's nonlife insurance sector, citing concerns about the sector's reserving adequacy. “The high industry risk of both sectors also reflects such factors as the industry's soft capital base, unsophisticated operational management, limited talent pool and increased competition,” S&P said. The agency last reviewed the Chinese insurance sector two years ago. The S&P rating action comes as the Chinese authorities issued a call to insurance and asset management companies to invest in China's capital markets. The call comes as the Chinese government prepares to release shares in listed former state companies on to the market to improve liquidity. Shares held by the government are said to account for nearly two thirds of stock market capitalisation in China.