PICC Property and Casualty Co's plan to launch an initial public offer in Hong Kong later this month is a positive development for the non-life insurance industry on the Chinese mainland, which is still in its infancy despite showing strong growth and an improved regulatory oversight in recent years, said industry officials.

Given that PICC is China's dominant non-life-insurance player, controlling about 70 percent of the market in terms of premiums, a successful fund raising would boost the financial strength of the overall non-life sector on the mainland, said Connie Wong, an analyst at Standard & Poor's.

Industry sources said that PICC would net HK$5.41 billion (US$693.56 million) via the IPO in November. American International Group Inc has agreed to buy 35 percent of the total shares PICC is offering. "Our studies show that additional capital is absolutely necessary to the continuous growth and development of China's insurance industry," said Wong.

The non-life-insurance sector has grown at an average 14 percent a year for the past three years, a rapid expansion rate that reflects the country's strong economy growth. China's insurance companies collected premiums worth 305 billion yuan (US$36.84 billion) in 2002, a year-on-year rise of 44.7 percent.

"The insurance industry in China has achieved fast growth in the past decade, a period when the average annual growth in premiums reached 23.6 percent," said Wu Xiaoping, vice chairman of the China Insurance Regulatory Commission.

However, the per capita spending for an insurance policy was US$28 on the Chinese mainland last year, compared with US$1,473 in Germany in 2001.

The assets of China's insurance sector accounted for only 3 percent of the Chinese financial industry at the end of last year.

"We encourage home-grown insurers to seek opportunities to be listed in a bid to quicken the sector's growth," Wu added.

Meanwhile, S&P estimates that the life insurance sector needs to increase its capital by 15 billion yuan to 20 billion yuan and the non-life insurance sector by 7 billion yuan to 10 billion yuan to achieve adequate levels of capitalization.

"The most likely method of raising new capital is through a public listing," said S&P. China's other insurers also plan to sell their IPOs in overseas markets.

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