China yesterday formally introduced new rules to restrict the ownership of big shareholders in insurance companies as it seeks transparent shareholding structures to eradicate control of insurance companies by unknown owners.
Under the new rules introduced by the CIRC, a single shareholder will only be allowed to hold a stake of up to 33% in an insurer, down from the current ceiling of 51%. The new rules also prohibit the holding of stakes through proxies.
The rules, which take effect from 10 April, stipulate too that investors must use their own funds to buy a stake in an insurer and cannot use a holding company or the transfer of expected returns to bypass capital restrictions. Investors are also forbidden from misappropriating insurance funds or changing the purpose of funds meant for investment.
All insurers have to build a “clear and reasonable shareholding structure”, and must reveal “the actual controlling entity to the regulator”, says a document published on the CIRC’s website. The set of rules now have 94 provisions compared to 37 previously.
Mr Sun Wujun, a professor with the School of Business in Nanjing University, said that some insurance companies like Anbang have been using complicated shareholding structures, which makes regulating difficult.
The CIRC is in the second year of a drive to reduce risks in the financial system, which includes a crackdown on risky investment products sold by some insurers and probes into whether they are providing covert funding to local governments.
He Xiaofeng, head of the CIRCs working group in control of Anbang and a director at the CIRC, said the regulator faces difficulties authenticating funding sources. The management of Anbang, whose shareholders' structure is opaque, was taken over by the CIRC on 23 February.