China’s insurance regulator tightens scrutiny in wake of chief watchdog’s dismissal

China’s insurance regulator has issued guidelines highlighting industry risks for the second time in a week as it continues to ratchet up its scrutiny following the dismissal of Xiang Junbo, the sector’s most senior watchdog.

Insurance companies should “avoid aggressive investment strategies”, and take measures to avoid risks stemming from 10 specific areas including liquidity and capital management, new business development and the external environment, the China Insurance Regulatory Commission (CIRC) said in the latest guidelines, issued on Sunday afternoon.

“Insurance companies should set up a mechanism stressing prudential and steady investment, strengthen management over assets and liabilities, take reasonable risk preference, while avoiding an aggressive investment style,” the document said.

It also highlighted risks associated with making investments in several sectors, include buying stakes in listed and unlisted companies, property, and overseas assets.

CIRC’s former chairman Xiang was removed from his post for serious violation of the Communist Party’s discipline last Monday, becoming the highest-ranking financial regulatory official to be toppled in China’s anti-corruption fight.

The exact nature of Xiang’s misconduct has yet to be revealed by the party’s discipline authority, but his regulatory style – loosening controls around risky investment by insurers and tolerating short-term wealth management-style products – had been controversial.