China’s insurance watchdog vows to get tough on industry

China’s main insurance regulator has vowed to impose “stringent” rules and “severely” punish short-term speculation by insurers, in a move designed to tighten up the nation’s financial services industry.

The regulator will also curb “aggressive” pricing and the “unreasonably” high returns of some insurance products, according to Xiang Junbo, chairman of the China Insurance Regulatory Commission. Xiang told Bloomberg News that insurers shouldn’t attempt to interfere in the management of listed companies.

In an attack on the less scrupulous parts of the industry, Xiang vowed that the CIRC will “never allow insurance to become a rich man’s club, let alone allow financial crocodiles to use insurance as their channel or hideout. Any insurer that “challenges the regulatory bottom line, tarnishes the industry’s image or harms the people’s interest” will be driven out of the market, he said.

In a bid to stem the flow of cash out of China and tighten up the insurance industry generally, the regulator has been getting tougher across the last 12 months with a tightening of rulers on investment-type policies and a restriction placed on insurers’ acquisitions of listed companies.

Suspensions

The regulator also suspended Foresea Life Insurance Co in December, from selling new universal-life policies and froze new stock purchases by Evergrande Life Insurance Co. It then released a draft rule that would cap a single shareholder’s ownership in an insurance company at 33%, down from 51% currently.

In January, the CIRC issued new rules banning insurers from jointly acquiring listed companies with investors from other industries. When acquiring control of public companies, insurers also need to seek regulatory pre-approval, use their own money, and limit targets to the financial industry or insurance-related businesses with stable cash-flow expectations, according to the new rules.

China is still considering easing limits on foreign ownership in life insurers, according to reports earlier this week. The Chinese government may raise the long-standing 50% ceiling on an overseas life insurer’s stake in their local joint venture or let them wholly own a local unit, the people said, declining to be named as the discussions are not public, Bloomberg said. No final decision has been made on the matter.

ABOUT THE AUTHOR
Gary Robinson
Deputy Editor, International Investment and Head of Video at Open Door Media Publishing. A fully qualified journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as an IFA.

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