According to a June 21, 2016 report by a shipping industry website, as an important part of COSCO's shipping finance industrial cluster, COSCO Shipping Group plans to establish a captive insurer and is currently in the preliminary research stage.
It is reported that on June 12, Xiang Junbo, Chairman of the China Insurance Regulatory Commission, visited COSCO Shipping Group for research. Group Chairman and Party Committee Secretary Xu Lirong, Group Chief Accountant Sun Yueying, and Group Deputy General Managers Sun Jiakang and Ye Weilong attended the meeting.
Internationally, it has become a trend for large shipping enterprises to establish captive insurers. In 2014, Maersk Group, the world's largest shipping company, established the captive insurer Maersk Insurance A/S to handle its own risk management. This move saves the company one-third of its premiums each year, an amount of about 600 million Danish kroner. It was also the first shipping company in the world to establish a captive insurer. In 2015, Maersk's captive recorded a profit of US$14.017 million.
Shipping industry insiders believe that COSCO Shipping Group's establishment of a captive insurer offers many advantages.
First, the biggest difference between a captive insurer and an ordinary commercial insurer is that it only underwrites the insurance of its own group and its subsidiaries, with lower premium rates and premium income retained in-house. In this way, COSCO Shipping Group's insurance costs can be significantly reduced, and both premium income and insurance profits remain its own, which is conducive to performance growth.
Second, since COSCO Shipping Group is a large multinational enterprise with a huge number of branches and subsidiaries under it, establishing a captive insurer can effectively diversify risks across the group.
Third, after establishing a captive insurer, COSCO Shipping Group can "customise" exclusive insurance products and insurance schemes according to its own business characteristics, which are more suitable for the group than mass-market commercial insurance.
Fourth, captive insurers are no longer a novelty in China, and COSCO Shipping Group has ready-made models to draw on for establishing a captive.
Finally, COSCO Shipping Group's own development also calls for the establishment of a captive insurer. After the merger of the former COSCO Group and the former China Shipping Group into COSCO Shipping Group, a "6+1" model of industrial cluster development was proposed, which includes a shipping finance industrial cluster. According to COSCO Shipping Group's official website, the business areas of the shipping finance industrial cluster include shipping leasing - mainly ship leasing, container leasing and terminal and storage facility leasing - as well as other non-shipping leasing business, supply chain finance, shipping insurance, logistics infrastructure investment, and equity investment in financial assets. The shipping and non-shipping leasing businesses are mainly undertaken by the reorganised and transformed China Shipping Container Lines, which was also the highlight of the group's first round of restructuring; other financial services are handled by specialised companies such as COSCO Finance Co., Ltd., China Shipping Group Finance Co., Ltd. and China Shipping Group Investment Co., Ltd. Not long ago, the group also established COSCO Shipping Financial Holdings Co., Ltd. on the basis of China Shipping (Hong Kong) Holdings, which will work together with China Shipping Container Lines to form the group's grand financial holding platform, engaging in financial business including ship leasing, container leasing and manufacturing, non-shipping leasing, equity investment, intra-group financial services and bank equity, as well as insurance business including insurance and insurance brokerage such as Haining Insurance Brokers.
In the future, the captive insurer to be established by COSCO Shipping Group, China's largest shipping enterprise, will have a business scope covering mainstream shipping insurance products such as hull and machinery insurance, shipowners' liability insurance and even cargo insurance.