China’s Belt and Road Initiative (BRI) is generally understood as an infrastructure initiative, delivering large scale transport and energy projects to Latin America and other regions. However, given the shifting focus of China’s overseas engagement in recent years, it is better understood as a connectivity-enhancing venture—still focused on infrastructure development, certainly, but also on making digital, people-to-people, financial and other connections across both developed and developing regions.
Having recently examined China’s growing focus on forging people-to-people ties in Latin America and the Caribbean, Health Silk Road developments, and China’s transport infrastructure interests in the region, the Inter-American Dialogue’s Asia and Latin America Program is pleased to offer new analysis of Chinese involvement in Latin America’s financial services sector. This first of three reports on the topic examines the extent and nature of Chinese insurance industry engagement within the region, as well as prospects for future activity in this area, whether in support of BRI expansion or in pursuit of greater market share in the region’s growing life and non-life insurance industries.
KEY FINDINGS:
- China’s growing overseas footprint has meant more risk exposure for its projects, companies, and workers. With this in mind, China’s top planners have recently underscored the importance of enhanced insurance support for the country’s overseas operations in recent five-year plans and in policies toward Latin America.
- China’s insurers have been strongly encouraged to mitigate trade risks through export credit insurance or tariff guarantee insurance, and to support the broader needs of the many Chinese companies developing the Belt and Road Initiative. With overseas interests in mind, China’s 14th Five-Year Plan (2021–2025) and other policy documents promote a continued focus not only on “bringing in,” or allowing more foreign capital in China’s insurance industry, but also on “going out,” or overseas investment.
- China Export and Credit Insurance Corporation (Sinosure) was among the first of China’s insurance companies to guarantee major Chinese engineering or construction projects and exports in Latin America.
- In addition to Sinosure, other Chinese insurers have made recent inroads in the region, addressing the growing needs of Chinese companies through cooperative arrangements with Latin American insurers or acquisitions of international insurance companies. In other cases, Chinese companies have forged partnerships in reinsurance, joining Sinosure in supporting BRI-related infrastructure development across Latin America.
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The extent to which China’s major insurers will take advantage of growing demand in Latin America for life and non-life products is unclear, but there are nevertheless some signs of growing interest among Chinese providers. Also evident in recent years is a growing focus on providing risk analysis and rescue services for Chinese companies operating in Latin America and other regions.
The nature of Chinese overseas insurance activity and BRI expansion in the region will of course be shaped by wide-ranging factors. Much will depend, for instance, on the extent of Chinese infrastructure companies’ appetite for high-quality insurance products. The industries in which Chinese companies focus in the coming years will also shape their insurance needs. Looking ahead, possible changes in China’s approach to project selection might generate greater demand for insurance guarantees from Chinese or foreign firms. At the same time, political and economic uncertainties in the region, climate change, and other factors could limit interest and capacity among the major insurance companies already operating in Latin America.
– Margaret Myers, The Dialogue
