Insurance business in Shanghai, China's largest port and commercial center, rocketed last year, with life coverage showing the strongest growth.

Jan. 26 figures from the central bank show insurers operating in Shanghai netted premiums aggregating 8.76 billion yuan ($1 billion), up 53.6 percent on a year earlier.Life insurance sold by both domestic and overseas companies in the city earned 5.7 billion yuan, the local branch of People's Bank of China reported. That is well above the forecast of 4.6 billion yuan made in mid-December by the Shanghai Association of Life Insurance Companies.

Premiums on life policies accounted for 31 percent of Shanghai's business in 1992, but rose to 65 percent in 1996. Property premiums declined to 35 percent from 69 percent over the same period.

Wang Huaqing, deputy governor of the bank's Shanghai branch, said in releasing the study that competition in the life sector is likely to intensify this year. The participation of overseas-funded companies in the market will enhance vitality and competition, he said.

Seventy-five percent of overseas-funded companies applying for licenses in Shanghai are in the life business.

Shanghai was the first city to permit foreign companies to write policies, and remains one of only two to do so.

The American International Assurance Ltd. unit of New York-based American International Group Inc. and Tokio Marine & Fire Insurance Co. were the first foreign players allowed in. AIA subsequently also received a license for the southern city of Guangzhou.

All the world's big players are hankering after a crack at China's huge but undeveloped and badly underinsured market. Officials are rationing licenses carefully to protect what they say are struggling domestic firms unable yet to compete.

Unlike AIA and Tokio Marine & Fire, which were granted stand-alone licenses, later entrants were required to form joint ventures with a local firm.

China normally makes overseas insurers show good faith by instituting programs to help develop the industry, in addition to at least two years with a nonperforming representative office in the country.

As reported, Royal & Sun Alliance is working with Lincoln National Corp. of Fort Wayne, Ind., on a project to improve central bank supervision of insurance. The two invested $1.4 million to fund a study by the Coopers & Lybrand accounting and consultancy firm.

Government statistics show 84 insurance companies from 13 countries have set up 144 offices in China. They had more than $1.3 billion in total assets at the end of 1996, with premiums of 575 million yuan, or 0.74 percent of the market.