companies upon accession to the WTO. Russian prohibition of foreign participation in mandatory insurance lines as well as Russian restraints on the number of licenses granted to foreign life insurance firms will be phased out five years after the date of accession. Russian had restrained the amount of foreign investment in the sector to be about 15 percent of total investment; but as part of its accession commitments, Russia agreed to increase this limit to 50 percent.

The Russian banking and insurance sectors see themselves as very vulnerable to much more powerful and efficient multinational providers of financial services. As such they were strong opponents of commitments in these sectors. The insurance sector was reportedly very concerned by the level of commitments made by their government in the rush to get an agreement prior to the G-8 conference in Saint Petersburg in late spring 2006. The experience of China, where similar fears were expressed by insurance interests, is instructive and suggests that these fears are exaggerated. Prior to 2001, China had a very closed insurance market. As part of its WTO accession commitments, China agreed to gradually remove restrictions on foreign investors in insurance and fully open its insurance markets by January 2005 (except foreign companies could hold a maximum of 50 percent in the life insurance market; (see Mattoo (2003, p. 312). As expected the results have been extremely positive for consumers of insurance services in China. In addition, wages of skilled workers in the insurance sector have grown, and even domestic insurance companies have grown, due to better access to foreign capital as foreign investors, with only one exception, have sought and obtained local partners.<sup>7</sup> .

> 7 The key developments in the insurance sector since China’s accession to the WTO in 2001 are: (i) very strong growth of both domestic Chinese and foreign insurance companies operating in China; (ii) continued dominance of the market by Chinese companies; (iii) large increase in employment of skilled workers in the sector; (iv) entry by foreigners through either joint ventures or strategic investment in Chinese companies; and (v) acquisition of foreign capital by Chinese companies through strategic partnerships.. Total premiums have more than doubled between 2001 and 2005. During this time, the total number of insurance companies has increased from 41 to 78, and the number of Chinese companies increased from 20 to 41. (Facts on the Chinese insurance market for this note are taken from primarily from Ewing (2006) and supplemented from Datamonitor (2005).)

The largest insurance market in China is life insurance, which captures about two-thirds of the total insurance premiums in China. The life insurance industry in China has more than doubled from 2001 to 2005, and forecasts are for continued growth in the market that will likely double the size of the market by 2010. Life insurance premiums increased from 140 billion yuan ($17.5 billion) in 2001 to 365 billion yuan ($45.4 billion) in 2005. Demand for actuaries, underwriters and managers has soared, e.g., the industry added 500,000 new agents to bring the total to 1.5 million. The life insurance market remains dominated by domestic companies, especially three large domestic Chinese companies: The domestic share of the market was 91 percent in 2005, down from 97.5 percent in 2004. Most of the domestic life insurance companies have taken on a strategic foreign investor (like HSBC, Zurich Financial Services, Meiji Life Insurance and the Carlyle Group), as these investors now own minority shares of the companies, with shares ranging from 1 percent to 25 percent. In 2006 there were 22 foreign life insurance companies operating in China, but 21 of these were joint ventures with Chinese companies. Thus, there is a very strong pattern among foreign life insurance companies to either form a joint venture with a Chinese company or else to purchase a minority strategic interest in a Chinese run company. Only American International Group sells life insurance in China independently of a Chinese partner.

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