Across The Border | Unlisted insurers to be hit hard by clampdown on flexible, but ‘risky’, universal life products
Essentially current accounts offering a high rate of interest, insurers have been using cash generated from the products to invest in listed companies
China’s planned tightening of the universal life insurance product market will be a heavy blow to newly emerged unlisted insurers, many of whom have expanded rapidly through the aggressive sales of the products.
But the new rules are unlikely to hurt the earnings of publicly-listed insurers.
China Insurance Regulatory Commission (CIRC) published two public consultation documents late last month on curbing universal life insurance products, mainland media Caixin reported last week.
Of the proposed new rules, the life products cannot be surrendered within the first three years without charging penalties, and insurance products and annuities with a guaranteed rate of higher than 3 per cent and 3.45 per cent, respectively, will need regulator approval, Caixin reported.
“They [the documents] set very strict rules on such products. They basically reject all similar products with an duration of less than three years...making them very hard to sell....the premium growth in universal life policies may slow down hugely, as a result,” Tang Bolun and Huang Jie, analysts at CICC wrote in a research report.
The proposed rules are positive for listed life insurance players, however, who rely little on universal life policy sales, and so competition from aggressive unlisted insurers is expected to ease as a result, they said.