Three new insurers join increasingly crowded sector

Fosun, Tencent and Citic back the latest firms approved by industry regulator

PUBLISHED : Friday, 05 August, 2016, 7:31pm
UPDATED : Friday, 05 August, 2016, 7:31pm

Competition in China’s insurance sector is set to intensify even further, after three new insurers — backed by some of the country’s leading corporates — were given permission to launch new operations on Friday.

The China Insurance Regulatory Commission (CIRC), China’s top insurance regulator, said it had given approval to Fosun United Health Insurance, Hetai, and Aixin Life.

All have one year to prepare to launch, and a final review of their operations will then be carried out by the regulator

Fosun United Health Insurance is backed by Shanghai Fosun Industrial Investment, a subsidiary of Fosun International, the mainland based conglomerate, and five other private companies. It will become Fosun’s eighth insurance platform.

Fosun’s founder and chairman Guo Guangchang has previously said he is attempting to emulate legendary US investor Warren Buffett, by investing in insurance.

In its filing with the Hong Kong exchange, the company said the creation of Fosun United was “to generate synergies between the group’s resources in sectors such as insurance and healthcare through integration”.

Hetai is backed by Citic Guoan Group, a subsidiary of Citic Group and Yingkebicheng, itself a subsidiary of internet tech giant Tencent. Six others are also investing in a new life firm.

Tencent joined Alibaba and Ping An Insurance to set up an online property and casualty insurance company, Zhong An, in 2013. Alibaba is the owner of the South China Morning Post.

Aixin Life, is being jointly set up by 11 investor companies from various sectors including real estate, mining, apparel manufacturing and finance.

Insurance companies became the most active and aggressive investors in China’s equity market last year, after the CIRC raised the cap of an insurer’s equity investment quota to 30 per cent of total assets, from the former 25 per cent.

Thirty-six listed companies saw 5 per cent or above of their stock bought by insurers in 2015, according to data from HiThink.

Foresea Life, a little-known life insurer owned by conglomerate Baoneng Group, has been instrumental in helping its parent built up a 25.4 per cent stake in leading property developer China Vanke, which has now led to an acrimonious takeover battle for the housebuilder.

According to CIRC, more than 30 listed companies are now in the process of setting up new insurance operations.

“Although Chinese industrial tycoons have flocked to expand into the insurance sector, the CIRC is advising caution, and has been urging them to keep a close eye on product risk, to avoid any asset-liability mismatch,” said Dayton Wang, analyst with Guotai Junan International in Hong Kong.

Xiang Junbo, chairman of the China Insurance Regulatory Commission, said in Beijing late last month that China would not allow conglomerates to use their insurance arms as financing platforms.

He said some insurance companies had been using low-cost financing tools to carry out “high-risk methods” to expand immediately, which was against the principles of the insurance industry.