Mak­ing in­sur­ers trans­par­ent

China Daily (USA) - - BUSINESS - By CAI XIAO

China’s in­sur­ance reg­u­la­tor is strength­en­ing norms to pre­vent in­sur­ers from turn­ing into fi­nanc­ing plat­forms of their ma­jor share­hold­ers.

The China In­sur­ance Reg­u­la­tory Com­mis­sion re­leased a state­ment in July that it will strengthen in­sur­ers’ eq­uity in­for­ma­tion dis­clo­sures.

It said in­sur­ers should dis­close stock trans­fer in­for­ma­tion within 10 days on their web­sites.

“This is a move to im­prove the trans­parency of eq­uity man­age­ment of in­sur­ers and guar­an­tee that their funds are le­gal and ef­fec­tive,” the CIRC said in the state­ment.

It also said in March that in­sur­ers should stop sell­ing prod­ucts like universal life in­sur­ance with shorter than one year tenures. The short­and medium-term in­sur­ance prod­ucts whose du­ra­tion is shorter than three years should be grad­u­ally de­creased, it said.

Universal life in­sur­ance is flex­i­ble, per­ma­nent, and of­fers low-cost pro­tec­tion as well as sav­ings, which are in­vested to build up cash.

Yuan Xucheng, di­rec­tor of the Life In­sur­ance Su­per­vi­sion Depart­ment at CIRC, said short- and medium-term in­sur­ance prod­ucts de­vel­oped fast in China, but some com­pa­nies may face risks like as­set-li­a­bil­ity im­bal­ance, mis­selling of prod­ucts and cash flow prob­lems.

For in­stance, Chi­nese prop­erty de­vel­oper Vanke com­plained to the CIRC in July that its largest share­holder, the Bao­neng Group, took ad­van­tage of its in­sur­ance as­sets to “il­le­gally” grab the lion’s share of as­set man­age­ment plans. The case is yet to be de­cided.

Many of Bao­neng’s as­set man­age­ment plans are linked to short- and medium-term prod­ucts like universal life in­sur­ance, ac­cord­ing to the com­pany.

Xiang Junbo, chair­man of the CIRC, em­pha­sized in Au­gust that in­sur­ers should be risk man­agers rather than risk mak­ers.

Share­hold­ers in in­sur­ers who seek to con­vert funds raised through sell­ing of in­sur­ance prod­ucts into low­cost fi­nance will be li­able for pun­ish­ment as per ex­ist­ing law and reg­u­la­tions, Xiang said.

Steven Lam, a life in­sur­ance an­a­lyst at Bloomberg In­tel­li­gence, said the CIRC has acted promptly in this con­text and may also pay at­ten­tion to in­sur­ers’ sol­vency.

In the Jan­uary-June pe­riod, pre­mi­ums of Chi­nese in­sur­ers reached 1.88 tril­lion yuan ($287.9 bil­lion), up 37 per­cent year-on-year.

In the same pe­riod of last year, the cor­re­spond­ing growth rate was 20 per­cent; and 17.5 per­cent in the first half of 2014, ac­cord­ing to the CIRC.

pre­mium rev­enue of Chi­nese in­sur­ers in the first half of 2016

WANG JING / FOR CHINA DAILY

Em­ploy­ees of China Life In­sur­ance Co chat at an in­ter­na­tional fi­nance expo in Bei­jing.

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