Moody’s raises view on China life insurers as regulatory tightening cuts risk
A government crackdown on the practice of issuing short-term policies for financial gain is improving the industry’s creditworthiness, the agency says
Moody's Investors Service has raised its outlook on the life insurance industry in China, citing a lowering of risk due to Beijing’s tightening regulation over the sector as well as steady economic growth that is fuelling demand for policies.
The credit rating agency said in a statement on Tuesday that it had lifted its outlook to “stable” from “negative”. It said that over the next 12 to 18 months, life insurers should report stable profitability and solid solvency metrics.
“The change reflects our expectation that the current moderate economy-wide build up in leverage, a shift to a more sustainable product mix and a slowdown in investment allocation to high-risk assets will prevent further deterioration in the creditworthiness of Chinese life insurers over the next 12-18 months,” said Zhu Qian, a Moody's vice-president and senior credit officer.
“For life insurers, premium growth will be lower in 2018, but insurance demand will be supported by steady economic growth, low insurance penetration and initiatives to promote long-term products,” she said.
China has taken a hard line against insurance companies over the past year, concerned that their issuance of short-term life policies, which were often used to fund acquisitions and asset-buying sprees, could increase risk and instability in the financial system.