Chinese insurers dipping into Dim Sum bond market

Value Success International's recent Hong Kong issuance of RMB2billion in 3-year "dim sum" bonds was a success, says Moody’s.

"The successful issuance by VSI, an offshore subsidiary of one of China's largest insurance groups, Ping An Insurance (Group) Co of China, signals the opening of a new channel of capital for Chinese insurers," says Sally Yim, Vice President and Senior Analyst at Moody's.

"Specifically, offshore issuance with dim sum bonds diversifies the investor base for Chinese insurers, improving their access to the capital markets and enhances financial flexibility, which is therefore credit positive," says Yim.

"VSI's capital needs are therefore met by this dim sum bond issuance in the offshore market, and this partly relieves the pressure on its parent, Ping An Group."

"According to media reports, the proceeds would not be repatriated onshore to support Ping An Group's insurance and banking business in China."

As insurance companies and their holding companies grow rapidly both domestically and abroad, new capital will always be required to support premium growth.

"This is particularly so for the property and casualty insurance sector," adds Yim who was speaking on the release of Moody's special comment on dim sum bonds, which she authored.

In 2010, total premiums of the Chinese life insurance industry grew 28.7% while those of the property and casualty sector grew 34.5%.

Dim sum bonds are offshore issuances denominated in RMB. This instrument is still new to the Chinese insurance industry since the first ever
dim sum bond was issued in 2007.

"However, we do not expect the issuance volume from Chinese insurers to be significant in the short to medium term," says Yim who explains why in the full report "Dim Sum Bonds Diversify Sources of Capital for Chinese Insurers" which can be accessed at www.moodys.com