Why did Fosun decide to invest in a reinsurer now?

Fosun is positioned as an insurance-oriented investment group. We hope to find investment opportunities in areas such as property and casualty insurance, life insurance and reinsurance to vigorously develop our insurance business and secure a good source of long term investment capital. This is extremely important to persist in our philosophy of value investment. We plan to form a financial company with insurance and reinsurance being the core businesses within five to 10 years.

Reinsurance is a business that requires a high level of trust and long term co-operation from both sides. This is highly consistent with our persistence in long term value investment. The long-term support of shareholders is an important advantage to a reinsurer. Besides our investment, Peak Re also has strong support from the International Finance Corporation, which is under the World Bank Group. Both shareholders have a high degree of consensus about the outlook and development strategy of Peak Re; that is a key reason for our decision to invest in Peak Re.

It has been five years since we first invested in Yong'an P&C Insurance. We have already gained some knowledge and experience in the insurance industry. Later we started worked with Prudential Financial and co-founded PramericaFosun Life Insurance. We learned some valuable experiences from Prudential Financial, which has a history of 138 years.

We feel that it is the right time to enter into the reinsurance business, especially when we can find an excellent team to run a reinsurance company. We are honoured to have Franz Josef Hahn and his colleagues as the management team of Peak Re. We believe their expertise and rich experience in the reinsurance industry can help Peak Re reach for a higher purpose.

Are you planning to invest in any more insurers in China or Hong Kong or elsewhere in Asia?

We see that the insurance industry in mainland China is experiencing a reshuffling. Insurance companies with stronger professional capability and a larger scale of business will look for merger and acquisition opportunities and acquire those with a smaller scale but facing growing pressure in their operation. This is bound to happen in an insurance market that is further opening up and developing. The market is always maturing.

Fosun has abundant experience in mergers and acquisitions. The group's investments in areas such as pharmaceuticals, mining and retail have been successful. Now Fosun has established an insurance business model driven by "three growth drivers", namely property and casualty insurance, life insurance and reinsurance. Our investment capability can help these three insurance companies to capture higher returns. There is also synergy with Fosun's industrial platform, helping these three companies to further raise their underwriting profit. We will continue to pay attention to investment opportunities in the insurance industry in order to further develop our insurance business.

Where do you see the main growth opportunities in China on the P&C side?

The insurance market in China has experienced high-speed growth for many years and it has entered a new phase that is relatively stable. Hopwever, the overall insurance depth and density is far below the global average. There is still huge potential in the market.

According to the China Insurance Regulatory Commission, the premium of P&C insurance in China has reached approximately 553bn yuan ($90bn) in 2012. That is a 15.7% increase compared to 477.9bn yuan in 2011.

The insurance industry has a large room for growth due to several reasons. They include the large base population in China, the low insurance penetration rate, quick growth of personal wealth, stronger awareness of insurance, high savings rate and weak social security system. We expect there will be steady long-term growth in the industry.

As regards P&C insurance, there is an apparent difference between the coverage of liability insurance, guarantee insurance and credit insurance in China and that in other major insurance markets. The ratio of property liability insurance in China is only 5% while it is above 30% in the US. We believe that the insurance market will see faster development as laws and regulations related to property liability improve and people's awareness continues to grow.

Catastrophe insurance coverage is still very low in China and falls well behind the global average. The contrast between the insured loss and total economic loss caused by catastrophes in 2010 is striking: in North America 75% of those losses were insured, Europe's number was 18%, while in Asia only 3% were covered by insurance. According to Lloyd's, the ratio of uninsured loss in China was far higher than that in other countries from 2004 to 2011.

For the Sichuan earthquake in May 2008, the government spent 800bn yuan on emergency relief and post-disaster rebuilding. The economic loss incurred was 80bn yuan. The insurance industry paid 1.66bn yuan of compensation, which was 1.96% of the total economic loss. The flooding in 2010 affected 28 provinces in the country and caused an economic loss of 350bn yuan; only 1-2% of the loss was insured.

China needs to build-up a differentiated insurance system for disaster-prone regions and also for different natural disasters. The current policy-oriented agricultural insurance can be referenced; it is a model in which the government co-operates with commercial insurance companies. Premium subsidy is an example of such co-operation. Insurance companies can arrange reinsurance to transfer the risk and this also brings opportunities to P&C insurance companies and reinsurance companies.

Do you feel the Chinese insurance market needs to open up more quickly to foreign investment?

At the moment, the insurance market in China is sufficiently competitive. Both state-owned insurance companies and joint-venture companies continue to achieve innovation of their business and service models to meet the more and more diverse needs of their customers. The Chinese market is still at a distance from the mature insurance markets overseas as the development of some insurance products and services is not fast enough. We believe this can be solved by strengthening the competitive market mechanism; we believe in the market economy.

What changes would you like to see the regulator make in China to help the industry?

The China Insurance Regulatory Commission has introduced a series of new policies this year. The purpose is very clear - to encourage the insurance industry to innovate and expand. It has also loosened the control over channels for investing insurance capital.

We hope that there will be more new policies that allow insurance companies to use the low-cost float more flexibly to realize prudent development in the long run.

Wang Qunbin (pictured) is the President of Fosun International which is listed on the Hong Kong Stock Exchange. The company invests in sectors such as financial services, energy and manufacturing.

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