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Asian News - China: Tough rules over short- and medium-term life products take effect

Source: Asia Insurance Review | May 2016

China’s insurance regulator has tightened its control over short- and mid-term life insurance products, in a bid to curb potential risks from aggressive insurers investing heavily in stocks and long-term assets using short-term funds.
   Mr Yuan Xucheng, Director of its Life Insurance Supervision Department, said that the rapid growth of short- and mid-term insurance products had given rise to concern about risk created by a potential asset-liability mismatch and liquidity conditions, reported Reuters.
   Under the new rules, CIRC reduced the industry’s total premiums from such products to between CNY500 billion (US$77.3 billion) and CNY550 billion a year, from CNY650 billion in 2015. The lower level would account for less than 20% of total premiums for China’s life insurance industry, Mr Yuan said, a reduction from 27% in 2015. At present, 57 life insurance companies are selling such products, he added.
   Each insurer is assigned a ceiling, depending on its capital. Those whose premiums from such products exceed the ceiling must increase their capital within three months to meet the requirement, according to the new rules.
   These regulations, effective from 21 March 2016, follow a buying spree by Chinese insurers in equities and real estate after CIRC loosened restrictions on insurance investment in 2014. In recent months, Chinese insurers have been active in both overseas and domestic markets.
   Mr Yuan said: “Insurance companies shouldn’t sell quasi-wealth management products purely for investment purposes. That’s not insurance.”
   Short- and mid-term life insurance refers to products where more than 60% of total policies issued are expected to have less than five years’ effective duration, according to the new regulation.
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