Companies should think 30 years ahead rather than three when it comes to expanding in such a complex and rapidly developing market as China, according to Zurich Asia-Pacific Regional Chairman Geoff Riddell.

China is already the world’s fourth-largest market, by gross written premium, for both general and life insurance.

And even the most pessimistic forecasts allow for growth of 5% a year over the next three decades, Mr Riddell says.

“China is well on its way to becoming the world’s largest insurance market,” he told insuranceNEWS.com.au in an exclusive interview.

But it is a challenging one, with stiff competition from large domestic insurers, and Mr Riddell does not expect straight-line growth.

He can see Zurich as a leading foreign player in 30 years, but says it is “pretty meaningless” to set goals for two or three years.

China opened to foreign insurers as a condition of joining the World Trade Organisation in 2001. More than a decade later, the outsiders hold only 1% of the market.

Last year’s PricewaterhouseCoopers (PWC) study of 31 foreign insurers in China found that although their market share “remains insignificant, they continue to press forward”.

“They hope that as the economy develops and the regulatory environment becomes more hospitable, they will gain traction, expand their product offerings, develop their brands and increase sales and profitability,” it said.

In 2006 Zurich became the first foreign insurer licensed to operate a general insurance business in Beijing. It grew quickly, but not to the point of “moving the needle”, Mr Riddell says.

The company writes commercial business for multinational clients and specialty lines where Chinese companies lack expertise, plus health and personal accident cover.

This year the branch was allowed to become a subsidiary, which will let it operate more licences.

Foreign insurers are now eyeing China’s third-party motor segment, which was opened to them last year and comprises about 70% of the general insurance market, according to PWC.

Passenger car sales are growing by about 10% a year, with 1.5 million new vehicles sold in July alone, but insurers must assess how they will deal with distribution and access to pricing data.

Zurich has a representative office in Shanghai and wants to write business there. Mr Riddell notes the city’s motor market is the size of a significant Western country’s.

He says all foreign insurers are examining how they could operate in motor.

“We are looking to understand what regulators are ready to allow us to do,” he said. “We want to increase our general insurance licences and we want a Shanghai licence.”

The China Insurance Regulatory Commission’s objectives can be hard to fathom, but it seems to issue an operating licence only when it is sure the company can manage the book of business.

“It means you have to show them you have the infrastructure to do it before you get the green light.”

Mr Riddell says the challenges go beyond the usual regulatory issues cited by many foreign businesses. Foreign insurers are up against huge domestic competitors that do not have the same stringent accounting standards and enjoy a significant home-ground advantage.

In property there are unknowns around risk, due to a lack of catastrophe mapping. China is affected by windstorms and earthquakes, more people are moving to coastal areas and the rapid pace of infrastructure and development raises potential risks from urban flooding that are hard to predict.

Mr Riddell says it would be easy to jump into the market, but Zurich’s aim is to move slowly but surely, gaining expertise as it works to becoming a major player.