China: Questions aplenty over nod for 100% foreign ownership of insurers
Source: Asia Insurance Review | Dec 2017
Foreign insurance players are keeping an eye on new regulations from CIRC following the Finance Ministry’s announcement that it would allow 100% foreign ownership of insurers in mainland China.
Among the issues of interest is whether or not foreign-owned insurance ventures will receive equal treatment as their domestic rivals. For example, for a long time, foreign players have noted restrictions on branch expansion.
On 10 November, the Ministry of Finance announced that it would lift the foreign ownership limit on life insurers to 51% from 50% in three years and remove the limit entirely in five years.
Mr Frank Yuen, Assistant Vice President – Analyst, Financial Institutions Group, Moody’s Investors Service Hong Kong, said in a commentary that the liberalisation move is credit positive for foreign life insurers operating in China because it will allow greater management autonomy. It will also benefit domestic life insurers as it encourages product diversity, which will address the current industry’s weakness of over-reliance on short-term spread dependent products.
There are at present 28 foreign insurers operating in China with only a 6.4% market share based on premium income for the first half of 2017. Mr Yuen noted that currently, some foreign insurers have limited their stakes in Chinese insurers to below 25% so that these joint ventures can be classified as domestic companies and thus avoid extra regulatory hurdles. But at the same time, the limited expertise of domestic partners and different return expectations have created additional barriers to expansion plans, and in some cases have lengthened the decision time or capital injection plans aimed at funding growth at these joint ventures. A