China's top insurance regulator has said that it would allow the trial of viatical settlement that could lead to an increase in premiums and strong returns.
A viatical settlement allows a third party to invest in another person’s life insurance policy at a discount from its face value. The buyer of the policy however continues to pay the monthly premium but receives the full benefits when the original policyholder dies.
The CIRC on Monday posted a draft rule on its website on the upcoming two-year trial programme of viatical settlement, and is soliciting public opinion until 26 January, reported the South China Morning Post.
Under the new trial planned by CIRC, analysts said consumers will have an incentive to buy insurance products as policies become tradeable, thus shoring up premiums for insurers. Market watchers expect premium growth and investment return to remain strong this year.
“The new practice, once put into effect, can make insurance products more attractive,” said Mr Kelvin Chu, an analyst at UBS, in Shanghai
To take part in the trial, institutions must have a minimum registered capital of CNY500 million (US$77 million).