China's first locally incorporated captive insurer shows that the country’s businesses are developing more sophisticated risk management strategies, according to A.M. Best.
China National Petroleum Corp and its subsidiary Petro China Co will develop a captive insurer in Karamay City, which is in the Xinjiang Uyghur autonomous region. The China Insurance Regulatory Commission expects the captive to be fully developed in September.
Wenli Yuan, a Hong Kong-based senior analyst at Celent, told A.M. Best that captive insurance is a new market for China that large companies can use to set up self-insurance funds.
She said: “Compared to managing self-insurance funds, a captive insurance company can manage various risks professionally and effectively.”
Yuan said that the oil and gas industry has its own personal risks that commercial insurance products cannot cover, creating an opening for captive insurers.
“Setting up a captive insurer is an important risk management method for many large multinational companies, which also requires the captive company to have professional risk management skill to spread their own risk,” said Yuan.
