Insurance Australia Group will buy a 20 percent stake in a Chinese insurer for around $107 million in a foray into the world's second-largest economy, marking a key step in securing 10 percent of gross written premium from Asia by 2016.

Australia's top car and home insurer, whose only significant overseas presence is in Britain, has earmarked Asia for growth as it struggles with writedowns in the UK.

"Once the partnership is complete, IAG will have a foothold in the two fastest growing economies in Asia and most populous countries in the world - China and India," said Chief Executive Mike Wilkins, who has repeatedly voiced interest in entering China.

IAG has agreed to buy the stake in Bohai Property Insurance for 687.5 million yuan ($106.29 million) and expects the deal to be completed in early 2012.

Bohai was set up in 2005 and boasts annual gross written premium of over A$200 million ($215.52 million). It is based in Tianjin, near Beijing, in the Bohai economic region, which generates around a third of China's GDP and also a third of China's insurance premium pool of $60 billion, IAG said.

Bohai is predominantly a motor insurer, a sector which is set to grow 10-15 percent per annum over the next decade.

In Asia IAG also owns 26 percent of an Indian joint venture with top Indian lender State Bank of India , where it hopes to get A$1 billion in gross written premium in five years. It has also established business in Thailand and Malaysia.

Asian operations contribute A$430 million to IAG's A$8 billion gross written premium now and the company has said it hoped to raise partnerships and acquire a portfolio of profitable business in select Asian markets.