New rules make it harder for investors to control Chinese insurers

PUBLISHED : Friday, 30 December, 2016, 9:04am
UPDATED : Friday, 30 December, 2016, 9:03am

China’s insurance watchdog on Thursday announced new rules to make it harder for investors to take control of insurance companies in a bid to drive out aggressive players disturbing market order.

In a new regulation, a single shareholder will be allowed to hold only up to one third of an insurance company, down from 51 per cent previously, the China Insurance Regulatory Commission said on its website. The regulator is soliciting public opinions on the new rules by January 31, 2017.

Investors are banned from controlling an insurer if they have been found guilty of malpractices in investments, dishonest business operations or irregularities disclosed to the authorities, the new rules stipulate.

“The regulator is aiming to avoid risks by trimming the concentration of shareholders in a bid to avoid insurance capital being abused by its major shareholders,” said Guo Zhenhua, head of the insurance department at Shanghai University of International Business and Economics. “A stricter control on the shareholders is expected to help guide the healthy development of an insurer.”

The insurance regulator has already sharpened scrutiny of aggressive insurers in the past months.

It has clamped down on the universal life products offered by insurance units under Baoneng Group and Evergrande Group, after their aggressive takeover attempts of listed companies upset financial regulators.

Earlier this month, Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC) made an unprecedented verbal attack on what he called “barbarians taking up stakes of listed companies with money from dubious sources.”

Universal life products are essentially high-yield wealth management products that include a life protection component, and usually promise short-term gains. Aggressive players have been rapidly expanding their businesses, increasingly buying in to the equity market to meet the high returns they’ve promised to investors.

The top insurance watchdog has suspended at least six insurers’ online selling channels as punishment for irregularities on selling universal insurance products during an inspection conducted on nine insurers during May and August, it said on Wednesday.