German insurance group ERGO has strengthened its commitment to the Chinese market through a new insurance brokerage joint venture.

This comes as global financial institutions expand their footprint in the domestic market to leverage its significant growth opportunities.

"China has been growing very strong on the GDP side and even stronger on the insurance side. And we also think that it (China's insurance market) will continue to grow significantly," Juergen Schmitz, CEO of ERGO China, told China Daily.

The European insurer's latest step to tap into the huge potential of China's insurance market, ERGO FESCO Insurance Brokerage Co Ltd, obtained regulatory approval to carry out the insurance brokerage business in November.

Based in Beijing, ERGO FESCO was established by ERGO and the Beijing Foreign Enterprise Human Resources Service Co Ltd or FESCO, a State-owned human resources service provider. ERGO and its subsidiary hold 66 percent of the venture's shares, while FESCO holds the rest.

As of late February, the venture has completed contracts with a range of enterprises — through which it reaches individual customers — spanning IT, finance and consulting to manufacturing and retail.

Schmitz, who is also chairman of ERGO FESCO, said the joint venture, collaborating with partners, provides comprehensive health insurance solutions that integrate the functions of insurance brokerage, health insurance third-party administrator and health management.

An insurance broker serves as an intermediary, assisting clients in selecting optimal, customized insurance policies. A third-party administrator (TPA) specializes in assisting insurance companies in direct payment, claim processing and other services. Health management services encompass expedited hospital services, health consultations and so on.

This integrated insurance solution was developed to cater to the increasingly differentiated demand of Chinese consumers, a trend that has provided opportunities for launching innovative insurance services, Schmitz said.

"They (Chinese consumers) not only want simple insurance coverage but related services such as handling of their claims," he said.

The insurance brokerage venture is part of ERGO's ongoing efforts to further enlarge its presence in China, as it completes ERGO's health insurance value chain here by adding a crucial sales component to the existing offerings that span insurance and services, Schmitz said.

In August 2023, ERGO was approved to become the majority shareholder of ERGO China Life Insurance Co Ltd, its life insurance JV in China, increasing its stake from 50 to 65 percent, as the country further opened up its insurance sector.

ERGO is among the international financial giants that are intensifying their presence in the Chinese market, experts said, contrary to a clear bias in some Western media's claims that China's economic development has peaked and lost appeal with foreign investors.

This month, Fidelity International, a global asset manager, increased the registered capital of its wholly owned mutual fund subsidiary in China by $30 million to $160 million, the fourth capital injection since the subsidiary's inception in 2021.

Other asset management behemoths like BlackRock and Neuberger Berman also ramped up the registered capital of their mutual fund subsidiaries in China last year.

"China's vast domestic market remains an investment destination that foreign enterprises can't afford to overlook," said Liu Chunsheng, an associate professor at the Central University of Finance and Economics.

Despite the headwinds of the US Federal Reserve's most aggressive interest rate hikes in decades, a net total of $62.1 billion in equity-based foreign direct investment flowed into China last year, according to the State Administration of Foreign Exchange.

Schmitz said China's institutional financial opening-up, which stresses aligning domestic rules and standards with international ones, is very important for ERGO, as having the same regulatory principles will help domestic regulators and foreign financial institutions "talk the same language".

"We like the development of the Chinese insurance regulation. Sometimes this makes it a bit challenging because there are many new rules over time. But the trend is the right one because it's becoming more and more specific and also more and more adopting the principles we see from other markets."

Hao Jie, board director and general manager of FESCO, said that the JV is aiming to build a robust service capacity in its first year of operation, intending to acquire clients through the combined networks of FESCO and ERGO.

FESCO will utilize its strengths in corporate client resources and health management capabilities in the JV's development, Hao said.

The venture aligns with FESCO's strategic focus on creating a platform offering comprehensive insurance as well as health management and examination services.

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