China: Insurance sector roiled by crackdown on "barbarian" stock mart players
Source: Asia Insurance Review | Jan 2017
The Chinese insurance industry has been put on edge, awaiting further actions by CIRC on corporate governance and stock market dealings.
CIRC is reining in aggressive short-term trades by insurers, which are seen as increasing volatility in the Chinese stock market and destabilising the management of listed companies whose stocks are the target of speculation.
The insurance regulator sent inspection teams to check compliance at Foresea Life and Evergrande Life, both seen as aggressive in their stock market dealings. CIRC also stopped Foresea Life from selling universal life insurance products until the insurer has addressed problems in managing customer accounts and information. CIRC suspended Evergrande Life from stock trading. The online sales of six insurers including Foresea and Evergrande Life were also suspended.
CIRC has been issuing warnings about asset management risks run by insurers for over a year. In March last year, CIRC issued regulations to curb universal life insurance sales to ensure that insurance policies were not being used as a low-cost source of finance. Many insurers had chased the stock market for returns to fund payments to holders of high cash-value, high-yield insurance products.
However, the warnings fell on the deaf ears of some recalcitrant insurers. Things came to a head on 3 December 2016 when China Securities Regulatory Commission Chairman Liu Shiyu in a rare outburst said: “By using improperly obtained money to conduct leveraged acquisitions, you’ve gone from strangers at the gate to barbarians and eventually robbers of the industry.”