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French insurer to seize opportunities from rural land reform

2014-01-27 14:07 Global Times Web Editor: qindexing
Yuri Narozniak, deputy CEO of Groupama AVIC Insurance.

Yuri Narozniak, deputy CEO of Groupama AVIC Insurance.

While China may have lost the lure for some foreign insurance companies that had reportedly withdrawn due to a long cycle of investment and low prospect of profit, it is presenting market opportunities for others.

China's urbanization as well as rural reforms aimed at improving productivity of its agricultural system presented great opportunities for an agriculture insurer like Groupama, Yuri Narozniak, deputy CEO of Groupama AVIC Insurance, told the Global Times during a recent interview.

Chinese policymakers said they would further push forward the modernization of agriculture in 2014 during the Central Rural Work Conference held in December, and would allow the transfer of contracted land and encourage massive scale of farming.

Unlike French farmers who are usually rich and own large farms, Chinese farmers are generally low-income earners.

Half a century ago, Groupama, a leading French and European agriculture insurance provider, was insuring French farmers with modest premiums like it is now in China.

"Because of rural exodus, farmland ownership has consolidated into the hands of fewer, thus increasing the size of farms, allowing higher investments in machinery and productivity and thus increasing the insurance premium," he said. "China is experiencing the same evolution which European countries have experienced."

Groupama established a wholly owned company in Sichuan in 2003 and started operation in 2004. Even before that, GAN, a subsidiary of Groupama, set up a representative office in China in 1994.

During 2004-10, Groupama operated alone in Sichuan and registered accumulative losses of 188 million yuan ($30.8 million) due to heavy investment and earned low revenue due to the limited market for agriculture insurance.

"Still we had strong faith in the potential of the market. We knew we had to find our way to develop and realized that the best way to do it is to team up with Chinese partners instead of going alone," he said.

The decision to team up with Aviation Industry Corporation of China (AVIC) was taken in 2010.

The first agreement of the 50-50 joint venture was signed in November 2010 at the French Elysee Palace. The JV was formally registered in March 2012.

In April 2013, Groupama and AVIC signed a second strategic agreement witnessed by Chinese President Xi Jinping and French President Francois Hollande to double the capital of the JV to 1.1 billion yuan.

It is now the biggest foreign-funded property insurance company in China.

Headquartered in Chengdu, Southwest China's Sichuan Province, Groupama-AVIC has five branches and has hired 1,228 staff as of December 31, 2013. So far, it is the only foreign insurance company that focuses on China's rural areas.

China ranks as the fifth largest market for Groupama worldwide by premium income. "But we expect it to become No.2 soon," he said.

The insurer has expanded to Northeast China's Jilin, Liaoning and Heilongjiang provinces and Northwest China's Shaanxi Province.

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