Dagong Europe sees growing Chinese investment in EU insurance sector

Dagong Europe, the European branch of China-based Dagong Global Credit Rating, is experiencing a general renewed interest from China in the European insurance sector, one of the most important insurance markets in the world.

Although some Chinese investors suffered losses during the European financial crisis, analysts at Dagong Europe in a recent report expect them to invest more in European insurance companies for strategic and tactical reasons, through mergers and acquisition activities and various financial instruments.

"Chinese investment in Europe peaked at 18 billion U.S. dollars in 2014. The growth trend is mirrored in the insurance sector," Linas Grigaliunas, director of financial institutions analytical team at Dagong Europe, said.

Grigaliunas told Xinhua that with its large market size, high diversity and technical expertise, and increasing highly-rated debt issuances, the European insurance industry is well-positioned to attract strategic and tactical Chinese investors.

In the space of a few decades, he noted, China's insurance industry has rapidly grown into one of the largest in the world. "We expect Chinese insurance companies to increase their investment abroad, driven by a need for wider asset and risk diversification," he said.

China's "Going Out" strategy of foreign investment, the Belt and Road initiative, and RMB internationalization all line up with Dagong Europe's beliefs that Chinese regulators will cautiously continue to open up the insurance market and facilitate investment overseas.

"Factors related to the European insurance sector's management capacity, development strategy, and deep technical expertise are all very valuable to Chinese insurers," Grigaliunas explained to Xinhua. "In addition, the post-crisis environment is still favourable for strategic long-term investment," he said.

In Dagong Europe's view, acquiring European insurance companies, or a significant minority stake in them, is a valid gateway for Chinese insurers to access to these advantages, which would otherwise be difficult.

The Milan-based agency expects the favorable conditions for investing in the European insurance market to remain for at least the next two years, and be further supported by a need to consolidate small and medium companies.

Richard Miratsky, head of corporate analytical team on China's investment in Italy at Dagong Europe, said the increasing trend in Chinese investments in Europe is expected to continue.

Such investments, he told Xinhua, will be driven "partly by China's aspiration to transform local dominant players into global leaders and partly by its need to upgrade its domestic production base towards higher value-added, better quality, and resilient-margin product portfolios."

Miratsky said Chinese investors' strong focus on sectors with high technological content, thorough know-how, and high brand recognition, will continue to drive their interest in automotive, engineering, machinery, and utilities in the short to medium term.

And in the medium to longer term, he told Xinhua, investments in the renewables, environmental technology and lifestyle sectors are expected to see expansion as environmental and living standards gain importance in China. Endit