Across The Border | China’s insurers will ultimately benefit from tighter regulations and rising interest rates

Tightening regulatory scrutiny and increasing investment yield under China’s interest rate up-cycle will be positive for the insurance industry, analysts say, with some expecting it to drive a series of re-ratings in the sector.

The China Insurance Regulatory Commission (CIRC), the watchdog overseeing the insurance industry, has been issuing stern words and guidelines since early April, stressing risk control requirements for insurers of all sizes.

The latest move came on Tuesday when it announced it would start conducting risk assessment on insurance asset management and investments, to avoid potential systemic risk stemming from overly aggressive investment activity by insurers.

A week ago, the watchdog banned Anbang Life Insurance – one of the country’s largest life insurers and a subsidiary of arguably China’s most acquisitive conglomerates, the Anbang Group – from applying for new products for three months after it found one of its annuity products violated rules governing short-term insurance products.

This sustained industry scrutiny comes after the fall of CIRC’s former chairman Xiang Junbo. He was removed from the post mid-April for alleged serious violation of Communist Party discipline – a term usually used to refer to corruption.

He becomes the highest-ranking financial regulatory official to fall from grace under the latest round of anti-graft moves led by the leadership since late 2016.