Insurance development resilience in China’s provinces

China holds huge economic diversity within its 31 mainland provinces, which creates a wealth of opportunity for the insurance industry. From the financial hubs of the east coast to the industrial production clusters in the south and the agricultural powerhouses in the centre of China, each province has a unique make-up.

To understand how insurance resilience varies in China’s regions, we construct a new Swiss Re Institute (SRI) China Provincial Insurance Development Resilience Index for each province. Our index has three pillars: insurance market development today, insurance market growth potential, and risk resilience against mortality and natural catastrophes. This third aspect integrates SRI’s global sigma Natural Catastrophe Resilience Index and Mortality Resilience Index methodologies to create globally comparable risk resilience scores.

We find that provinces’ insurance development resilience levels vary widely, with index scores ranging from less than 20% to over 90%. Higher resilience provinces are mostly well-developed economies, some located in coastal areas and so more exposed to seasonal typhoons and flood risks. Many contain major national transportation hubs, indicating a higher risk exposure for human-related risks too.

Medium-resilience provinces are mostly located inland and are less exposed to seasonal climate risks. However, they typically need to improve risk protection for low-frequency but high-cost risks such as earthquakes. The lower resilience provinces are more vulnerable in both economic and insurance market development, and we see an opportunity to focus on improving resilience. Given the difference in the levels of insurance development resilience and risk characteristics in provinces, targeted policies or measures should be considered to strengthen their resilience.

Provinces’ mortality resilience and natural catastrophe resilience indices estimates can be compared with our global market results to create a broader picture of where each province in China stands today. We find mortality resilience differs significantly across provinces, ranging from less than 20% to more than 50% in 2021, mainly due to differing numbers of households, rapid growth of per-capita income, and growing debt. Natural catastrophe resilience indices show steady annual improvement since 2019 both nationally and for most provinces. We find Beijing and Shanghai were the most resilient municipalities in 2021.

Insurance plays a role in assisting the addressing of long-term sustainable development challenges from an ageing population to climate change-related risks. Based on our research findings, the insurance industry can consider leveraging provinces’ strengths and provide support in weaker areas. Policy and process advancements can aid provincial governments in strengthening resilience in their regions.

Improving top-level policy design and inter-departmental coordination, for example by applying modern risk management theory and dynamic knowledge of the risk landscape, would improve resource allocation and policy deployment. Establishing a holistic framework for risk management that looks across all types of risk and considers their interactions is another key action to support strengthen provinces; the use of more public-private partnerships (PPP) can assist in managing emerging and catastrophic risks.