Under a pilot policy unveiled on Oct 28, Shanghai has allowed eligible domestic insurance institutions and their branches to invest overseas using net income generated from cross-border inward reinsurance transactions conducted through the Shanghai International Reinsurance Exchange.

The pilot provides a dedicated overseas investment quota of $1 billion, which will not count toward participating insurers' existing Qualified Domestic Institutional Investor (QDII) quotas.

Reinsurance is often described as "insurance for insurers". In a reinsurance arrangement, a primary insurer transfers a portion of its underwritten risk to another company (the reinsurer) in exchange for a share of the premium. This helps insurers spread their exposure to potentially catastrophic losses caused by events such as those arising from hurricanes or earthquakes.

The pilot policy links risk coverage with global asset allocation, offering domestic insurers a new avenue for overseas investment and stronger incentives to underwrite offshore risks, while filling a gap in the risk protection chain for Chinese companies going global.

Swiss Re estimates that risk coverage demand in countries involved in the Belt and Road Initiative will approach 200 billion yuan ($30.04 billion) by 2030.

The first batch of pilot financial institutions comprises PICC Property and Casualty Co, China Pacific Property Insurance Co, Ping An Property & Casualty Insurance of China, and China Re P&C. Industrial and Commercial Bank of China, Bank of China, and China Construction Bank provide supporting services, and the Shanghai International Reinsurance Exchange serves as the trading and settlement platform.

Shanghai International Reinsurance Exchange opened in the Lin-gang Special Area in December 2024, bringing risk coverage demand, underwriting capacity, and settlement and trading data into a single digital marketplace.

Cumulative trading premiums in the international reinsurance functional zone of the Lin-gang Special Area surpassed 10 billion yuan in 2025, and trading premiums from January to August this year exceeded last year's total.

All transactions on the exchange now use standardized documents, with data recorded on-chain for verification and transmitted automatically. This has reduced the time required for the dual-signature billing process from 30 days to 1.1 days and shortened account settlement from 45 days to 3.4 days.

Fourteen institutions, including Ping An Property & Casualty Insurance of China and PICC Property and Casualty Co, have directly connected their systems, reducing labor input in reinsurance and finance by more than 80 percent.

A total of 187 insurance-sector institutions had registered and obtained trading access as of Oct 26, including 64 overseas institutions. ICBC-AXA Life became the first life insurer registered on the platform.

Zhu Xiaoyun, president of China Re, said the pilot policy highlights the strategic value of reinsurance as a market-based risk management tool connecting the world. She said China Re, as a State-owned reinsurer, has set up four specialized institutions in the Lin-gang Special Area and will make full use of the policy to promote two-way reinsurance business flows between China and overseas markets. The company also aims to bring insurance-linked securities and other innovative business to the zone.

Source: Shanghai Observer