China insurance regulator bars Anbang from new product issuance for three months

The high-profile overseas acquirer may face liquidity pressure if consumers ask for policy surrender collectively after regulatory crack down, analyst says

PUBLISHED : Friday, 05 May, 2017, 5:48pm
UPDATED : Friday, 05 May, 2017, 10:55pm

Anbang Life Insurance company, the flagship of China’s Anbang Insurance Group, the country’s highest-profile cross-border acquirer, has been punished and reprimanded by China’s insurance regulator for breaking industry rules.

Anbang Life is now banned from new product issuance for the next three months, after the China Insurance Regulatory Commission (CIRC) found one of its annuity products had violated the regulator’s rules governing short-term insurance products and disturbing market order, a statement issued by the commission said on Friday afternoon.

The regulator has also asked Anbang to “immediately” suspend the products failed to meet regulatory standards, while urged the later to “pay high attention to problems in products development, take responsibilities, and rectify its work by strictly adhere to regulatory policies and requirements”.

“The CIRC would take the next regulatory step based on the condition Anbang implement the rectification,” the statement said.

Given Anbang has been aggressive in issuing short-term insurance policies with flexible terms for surrender, the impact brought by surrender might be bigger than on its peers
Dayton Wang, a leading insurance analyst formerly with Guotai Junan International

Dayton Wang, a leading insurance analyst formerly with Guotai Junan International, said the “most concerning part”, is not the three-month suspension for issuance of new products, “but the potential liquidity crunch Anbang faces if consumers lose confidence in the brand and ask for surrender collectively”.

“Given Anbang has been aggressive in issuing short-term insurance policies with flexible terms for surrender, the impact brought by surrender might be bigger than on its peers,” he added.

Others, including Brock Silvers, managing director of Kaiyuan Capital, a Shanghai-based investment advisory firm, said however they believed the punishment could actually be positive for Anbang.

“CIRC’s strongly-worded rebuke to Anbang Life Insurance may actually represent more sound than fury,” said Silvers.

“The market for ‘structured products’ has already seen a dramatic decline over the last few months as the government attempts to deleverage the economy.

“CIRC’s notice could be good news for Anbang, if it indicates a relatively mild ending to what the market has perceived as a period of political uncertainty for Anbang and its chairman Wu Xiaohui.”

Anbang has also been fending off media rumours this week claiming Wu had been detained by the authorities, since the fall from grace of former CIRC chairman Xiang Junbo in mid April.

The company issued an open letter on Wednesday, saying it would take legal action against mainland financial magazine Caixin, over what it called “slanderous” allegations involving financial irregularities and the marital status of its chairman.

China’s anticorruption storm has been sweeping the financial sector since the end of last year. On April 17, former CIRC chairman Xiang was dismissed for “serious violation” of the Communist Party’s discipline rules.

During a top-level politburo meeting discussion last Wednesday, president Xi Jinping made a renewed call for a regulatory crack down to prevent further financial risk.

“We believe the new CIRC leadership is showing a renewed commitment in strictly enforcing the principle of risk control and the updated regulations issued since late-2016,” said Leon Qi, a senior analyst at Daiwa Capital Markets.

“The strongly-worded announcement shows CIRC has no tolerance on bypassing the regulations or weakness in its enforcement, or any potential internal fraud within the regulator, suggested by previous statements from authorities,” he added.

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