Foreign investors' interest in China's insurance market is growing, despite the flat performance of foreign insurers in the country in recent years, industry analysts said on Wednesday.

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The China Insurance Regulatory Commission has just approved a plan by Insurance Australia Group Ltd to buy a 20 percent strategic stake in the Tianjin-based general insurer Bohai Property Insurance Co Ltd.

IAG will pay 687.5 million yuan ($103.3 million) for the stake, making the Australian insurer the largest single shareholder in the company.

"As foreign insurers can set up a wholly foreign-funded property and casualty insurer in China, IAG's move to take a stake in Bohai signals the Australian company's eagerness to enter the market," said Wang Guojun, an insurance professor at the University of International Business and Economics.

Wang said that although the deal was not triggered by the country's opening-up of the compulsory third-party liability insurance business to foreign insurers, the move does help to boost foreign insurers' business and market shares in China.

Tom Ling, PricewaterhouseCoopers insurance leader for China, said entering the mandatory third-party liability market might expand the pie for foreign property and casualty insurers.

"This is definitely good news for foreign insurers, but it can hardly change the market structure in the short term," said Walkman Lee, head of insurance at KPMG China.

According to a report by PwC, nine respondents on the property and casualty side of the business said their growth this year will fall into a range of 15 to 75 percent, and this pace of growth is expected to continue in the next three years.

Meanwhile, ERGO Insurance Group and the Shandong State-owned Assets Investment Holding Co Ltd announced on March 30 that they received approval from the CIRC to start work on a life insurance joint venture.

With an initial investment of 600 million yuan, the joint venture will be headquartered in Jinan, the capital of Shandong province. It is expected to start operating in the first half of 2013.

"The Chinese insurance market has developed consistently at high growth rates during the past two decades and there is still a huge potential due to a growing middle class and the investment efforts in western provinces by the Chinese government," said Jochen Messemer, board member of ERGO Insurance Group

More than half of the foreign life insurance companies operating in China estimate that their business has grown from 20 to 40 percent in 2011, but their market share is expected to remain low, according to PwC's report.

The market share of the foreign insurers, however, hasn't moved much. Life insurers hovered at 5 percent and property and casualty insurers at 1 percent, the lowest in Asia, the report showed.

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