Monira Matin
China is considering easing the 50% ownership cap on overseas life insurers buying domestic companies in the biggest shakeup of the industry in almost two decades.
Last November, during a state visit to the UK, Chinese vice premier Ma Kai revealed that Beijing is planning to loosen its grip on stringent foreign ownership rules by allowing foreigners to hold controlling stakes in domestic financial firms.
The government is now pushing ahead with plans to allow life insurers to be wholly foreign-owned, Bloomberg reported earlier this week, citing unidentified people familiar with the matter.
If implemented, the move may be a ‘game-changer’ for international insurance players looking to get a larger foothold in China.
Most foreign life insurers run a joint venture structure, while some companies already some have self-owned branches.
Standard Life is currently in a 50/50 joint venture with local insurer Heng An. When contacted by International Adviser following Ma Kai’s announcement, a spokesperson for Standard Life said it was “not looking to increase” its stake or to invest in any other Chinese life insurance companies.
‘Barbaric’ life insurers
The relaxation of foreign-owned insurers comes at a turbulent time for China’s life industry, which in recent months has been slammed for high risk investment activities and aggressive acquisitions.
In December, a senior official at China’s insurance regulator accused insurers last December of behaving like “barbarians” over their conduct during acquisitions.
The regulator has also repeatedly warned insurers against the risks of selling high cash value short-term universal life insurance products as well as short-term trading, announcing that it plans to roll out new rules to reduce the proportion of insurance funds allowed to invest in stocks.
Despite the clampdown, earlier this month ratings agency Moody’s said life insurers in China will continue to shift towards riskier asset allocations over the next 12-18 months to support their business growth and investment returns amid the current low interest rate environment.
This article was originally published by International Adviser