Beijing rejects AIG's move to turn branch into subsidiary
The mainland insurance regulator has rejected an application by American International Group's life insurance unit to transform its Shanghai branch into a subsidiary, saying such a move would violate the country's entry commitments to the World Trade Organisation.
'The [China Insurance Regulatory Commission] won't approve the application because the restructuring plan to turn the American International Assurance Shanghai branch into a subsidiary is equal to setting up a new wholly owned life insurer in China,' the regulator said yesterday in a statement on its website.
'This has a legal obstacle and runs counter to China's commitments in line with its WTO entry. Under the WTO, China allows overseas life insurers to only set up joint-venture life insurance business in China and own no more than 50 per cent.'
An AIG spokesman said the group had no comment on the CIRC decision. Fellow insurers believe the move marks the end of special treatment enjoyed by the American giant.
AIG was the first foreign insurer to enter the post-revolution mainland insurance market, re-establishing itself there in 1991. It is the only life insurance company to operate independently in the mainland without a partner. It operates in eight cities including Beijing, Shanghai and Guangzhou.
The firm received special treatment for entering the mainland before the joint-venture requirement was introduced in 1996.
AIA is the largest foreign insurance firm on the mainland, accounting for 22 per cent of new business sold by all foreign insurers on the mainland in the first 10 months of this year, CIRC figures show.
Despite its strong market position, AIA's special status to run independently has led to its difficulties in getting regulatory approvals.
Yesterday's rejection by the CIRC marked the second time the regulator showed its displeasure at AIG's independent operation.
In 2004, the CIRC rejected AIG's application for group life, health and personal accidents business while it allowed six other Sino-foreign insurance companies to conduct those businesses. AIG has withdrawn the application.
It took 18 months of negotiations and AIG banning its Hong Kong agents from selling policies on the mainland to obtain a licence to sell group life and health policies in the mainland in the middle of last year.
Bernard Charnwut Chan, legislator for the insurance sector, said the CIRC's decision was intended to show the world that it was following Beijing's WTO commitments.
'Many European and US insurance companies are complaining about AIA's special treatment. The CIRC obviously does not want to be blamed by giving AIA more privileges,' Mr Chan said.