Australian insurers will gain greater access to China’s expanding motor insurance market under a new free trade agreement between the countries.

“For the first time… China has committed to allow Australian insurance providers access to China’s lucrative third-party liability motor vehicle insurance market without form of establishment or equity restrictions,” the Government says.

The agreement also includes improved treatment for the establishment of Australian insurer branches in China.

Beneficiaries of the deal will include IAG, which has already invested in China as part of its broader expansion in Asia.

“We welcome the free trade agreement between China and Australia,” CEO Mike Wilkins said. “Asia is an integral part of our long-term strategy and we look forward to seeing the detail of the agreement.”

Middle class consumption in China is expected to top $US12 trillion ($13.9 trillion) by 2020, presenting a significant opportunity for businesses, according to IAG.

“This agreement also highlights the opportunities available for those Australian businesses that are willing to invest in developing an Asia-capable workforce and organisation,” Mr Wilkins said.

In 2012 IAG bought a 20% stake in China’s Bohai Property Insurance Company, which is primarily a motor insurer.

QBE opened a representative office in Guangzhou in 1998, while AMP Capital last year established a funds management business with China Life Asset Management Company.

China and Australia signed the free trade declaration of intent last week, having started the negotiation process in 2005.

Prime Minister Tony Abbott says the deal includes a built-in mechanism for further liberalisation and the expansion of market access.

“This places Australia in a strong position to secure additional gains as China undergoes further economic reform into the future,” he said.

QBE has declined to comment until more detail on the deal is available.

Suncorp Commercial Insurance Statutory Portfolio & Underwriting Management EGM Chris McHugh says the company’s focus remains the domestic personal injury market.

International law firm Allens estimates the free trade agreement will become effective next year after formal treaty processes are completed.