The current CIRC leadership is showing “renewed commitment” to strictly enforcing the principle of risk control, following the removal in April of the agency’s Chairman Xiang Junbo from his post for serious disciplinary violations.
Mr Leon Qi, a senior analyst with Daiwa Capital Markets in Hong Kong, in a recent research note, said: “Intensified regulatory scrutiny on the sales of life insurance products (especially short-term products and universal products) and investment behaviour has been carried out over the past few weeks.
“Such strong enforcement will help curb overly aggressive pricing competition in the sector.”
On prospects, he wrote: “Chinese life insurers will continue to see a significant positive impact from rising interest rates in the first 1-2 years of the current interest rate up-cycle, and face macro headwinds at the latter stage.”
Resume focus on underwriting
S&P Global Ratings credit analyst Eunice Tan, in a separate report, added that she expected market discipline among insurers to improve and risk measures to tighten, with the rapid expansion of some insurance companies in 2014-2016 unlikely to be repeated.
“In our view, insurance companies will resume their focus on underwriting and cut back on speculative investments, while more prudently managing their regulatory solvency position.
“The need to strengthen risk management and compliance will hike up operational costs, especially for small- and mid-size insurance companies,” said the report.
“The hunt for risk management talent will also intensify...while more intensive supervision and rigorous policy implementation may become increasingly challenging for CIRC, given China’s rapidly changing insurance landscape.” A