China: Insurance and financial industry regulation set to be discussed by lawmakers
Source: Asia Insurance Review | Mar 2018
Global Asia China Regulation C-Suite
Tighter supervision and continued risk prevention in the Chinese insurance industry are expected to be emphasised at the annual session of the National People’s Congress (NPC), the national legislature which will convene on 5 March.
These issues will be part of the wider discussion on supervision of the financial sector that had alarmed Chinese leaders because of problematic conduct including collusion between regulators and business, aggressive stock market behaviour, opaque shareholders’ structures and shadow lending.
Over the past two years and continuing into this year, the CIRC has moved to tighten regulation on the insurance sector to prevent systemic financial risks. Chinese insurers had been flush with cash from the sales of short-term, high-yielding universal insurance policies. Proceeds were used to finance stock acquisitions and massive overseas investments.
Among the latest regulatory moves, the CIRC and the State Administration of Foreign Exchange (SAFE), issued a directive in February requiring insurance companies to cap their outstanding overseas financing, that is backed by domestic guarantees, at 20% of net assets as of the end of the previous quarter.
Tightening rules
In January, the CIRC and the Ministry of Finance tightened rules on how insurers can provide financing to local governments, as Beijing intensifies its crackdown on illicit local government borrowing and risky lending practices. Insurers are also banned from using private equity investment schemes as a channel to skirt regulations and increase local government debts.
Last December, the CIRC said that it would assess asset and liability management by insurers and it proposed rules governing independent directors of insurance companies.
The insurance regulator is also revamping its supervision of insurance intermediary and assessment services, as one of its major tasks this year. A