China is fast emerging as the giant economy that will supercede the US in terms of sheer size and growth, and the Chinese insurance sector is itself experiencing change at incredible speed.

What that will mean for established insurers and reinsurers in Bermuda is yet to be seen. Bermuda's John Milligan-Whtye and CORECapital are promoting the concept of genuine global partnerships that will link US and China corporations in a positive and sustainable way.

To succeed it will require a mindset change amongst US business leaders about how they approach the world's new dynamic economic powerhouse.

Much of this will require tuning in to win-win situations, a concept that is promoted in two new economic volumes Mr. Milligan-Whyte has co-authored which are providing a roadmap for the future and have been enthusiastically received in China.

ACE and XL have already shown willingness to "add value"to their early entry into the China economy by providing teaching and educational benefits along with business link-ups.

Mr. Milligan-Whyte believes it essential that US companies form genuine global joint ventures with Chinese companies in order to survive and prosper.

"China has created a model of capitalism that is far more powerful than in the US. It is a model that Russia and Venezuela are rushing to copy,"he said. "A key difference is the fact that China exists as a 'permission society' rather than a 'rights society'.

"For 48 out of the last 50 centuries China has been the world's dominant economy. The last two centuries have been an aberration."

China has created 146 cities with populations of more than one million, compared to the US which has only 16 such cities. With many more China cities forming, the potential for funding the building of these cities and sustaining productivity is vast, Mr. Milligan-Whyte told attendees at the International Reinsurance Congress in Hamilton last week.

A delegation of leading figures from within the China insurance sector provided a window on the country's advancement.

In 1980 total insurance premiums in China amounted to $57.5 million. That has grown over the years to $1.9 billion (1990), $19.97bn (2000) and last year shot up to $70bn. But as heady as that sum might appear, in a country with a population of more than 1.3bn it means China is still only 72nd in the world when ranked on insurance density in relation to its population.

"So in terms of per capita we are still in a very young stage and there is a lot of room to grow,"said Professor Mannie Manhong Liu.

In 2004 world insurance premiums were split chiefly among the US, Europe and Japan, respectively accounting for 36 percent, 37 percent and 16 percent. By comparison China's share was only 1.6 percent.

Prof. Manhong Liu said China's economy had been growing at an average of eight or nine percent for each year during the past quarter century, outperforming the growth spurts of any other country and despite recent attempts by the Chinese government to cool the economy it has continued expanding relentlessly.

The country still has some way to go before its insurance sector can match the investment returns of western counterparts, but it is learning fast.

Investment returns amongst China insurance companies have risen from 3.59 percent to 5.8 percent between 2000 and 2006.

"That is better, but much lower than the world average," said Prof. Manhong Liu, explaining that it has been a perception with the China government previously that insurance money "must be very, very safe and so it goes into banks".

China insurance companies still have an overly large reliance on bank deposits within their investment strategies, averaging at 32.7 percent for the first half of this year - an improvement, of sorts, from the 54 percent of 2003. To put that into perspective, European insurers have around one percent of their assets in bank deposits while US insurers have three percent.

"We know (insurance) money has to be safe and liquid. But if you are not profitable how can you remain safe?"

As the China economy becomes more sophisticated, the make-up of investments among the insurance companies is changing. Apart from bank deposits and government bonds there are also equities, real estate and financial derivatives and futures.

Prof. Manhong Liu said: "From 2007 the insurance companies are allowed to invest overseas, but the limit is 15 percent of the company's total assets."

There is plenty of room for expansion in this area. In the first half of 2007 China insurance companies average overseas investment accounted for a mere 0.85 percent of assets.

Yanqing Xu, chief representative for the People's Insurance Company of China, explained that before 1988 there was only one insurance company in China, but by 1996 there were 10 and that has snowballed to 103 today, of which 58 are domestic and 45 foreign. However, the share of the China domestic insurance market amongst those foreign companies - of which AIG was the first - remains very small at just 4.5 percent.

The opportunities are there - but as Mr. Milligan-Whtye reminded delegates, there is a need for western business leaders to adopt a different approach to how to form lasting and productive partnerships with their Chinese counterparts. Examples of what ACE and XL have achieved are given in his newly published 'New China Business Strategies: Chinese and American Companies as Global Partners'.