China's insurance sector face limited impact from coronavirus

But prolonged disruption could hurt their investments.

China’s insurance sector is seeing limited direct financial impact from the coronavirus outbreak, reports Moody’s Investors Service.

Reinsurance and China’s public insurance funds will provide coverage for insurers, the report added.

“Large claims would likely be limited by coverage from China’s public medical insurance funds, which the central government said will cover expenses for infected individuals and suspected cases,” Moody’s stated in note.

“Additionally, some rated insurers have also taken out reinsurance against pandemic risk, that should in most cases cover significant parts of their in-force book,” they added.

Further, the current outbreak could raise awareness for health insurance in the long term and raise insurance demand in China.

Moody’s Vice President and Senior Analyst Frank Yuen noted that the the industry's premium mix remains dominated by savings-type products, with health insurance accounting for 22.8% of total life premiums at the end of 2019.

"The more immediate and significant impact from the coronavirus outbreak on Chinese insurers will stem from the resulting disruption on their broader business, and from the negative impact on investment portfolios due to lingering concerns over a potential further slowdown in the economy," adds Yuen.

Outside mainland China, pan-Asia and Hong Kong-based insurers may experience slower growth as the travel restrictions may put a plug on cross-border insurance demand.

Whilst these business flows were already affected by the fall in mainland Chinese visitors as a result of the social unrest in Hong Kong, current events threaten to delay any potential recovery, the report concluded.