"Capital injection is just the first step to strengthen our competitiveness to better compete with international reinsurers," said the senior manager, adding the next two steps are internal restructuring including improvements in the shareholding structure and corporate governance followed by a public listing.

In 2003, China Re reorganized into five units including property insurance, life reinsurance, property reinsurance, asset management and insurance broking.

Although China Re saw its revenue rise 12.8 per cent to 12.57 billion yuan (US$1.57 billion) as of June 30, with total assets reaching 29.77 billion yuan (US$3.72 billion) the country's only reinsurer could hardly meet the fast-growing market demand.

With a registered capital of 3.9 billion yuan (US$487.5 million), China Re's underwriting hovers around 20 billion yuan (US$2.5 billion). But premiums from insurance companies in 2005 topped 492.9 billion yuan (US$ 61.6 billion), with potential demand for reinsurance topping 100 billion yuan (US$12.5 billion). By 2010, China's insurance premium is likely to exceed 1 trillion yuan (US$125 billion), raising the reinsurance demand to 200 billion yuan (US$25 billion).

For the moment, the reinsurance premium only accounts for 5 per cent of total premiums. In mature markets the proportion is usually 20 per cent.

Meanwhile, more international reinsurance companies are entering the emerging market. The world's biggest reinsurers Swiss Re, Cologne Re and Munich Re, and Lloyd's have all established reinsurance operations in China.

Munich Re, for instance, held its board meeting in Beijing last week, the first time the world's second-largest reinsurer has held a board meeting outside Germany in its 126-year history.

In line with its World Trade Organization agreements, China ended compulsory reinsurance through China Re this year, heightening competition in the sector.

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