China is reportedly aiming to make it easier for foreign life insurers to acquire controlling stakes and make major investments in domestic firms.
According to a report by Reuters, citing five people with knowledge of the matter, the move is part of Beijing’s plans to open up the financial sector to international investment.
The plan, which is now being fleshed out by the China Banking and Insurance Regulatory Authority (CBIRC), also seeks to boost the capital levels of China’s small and medium insurers, the sources said, following the devastation wrought by the coronavirus outbreak on the financial industry.
The new requirements and rules are likely to be finalised in the second half of 2020, the sources said. These will then allow foreign insurers to acquire a controlling or significant minority stake in a local life firm, operating it separately from any existing joint ventures or wholly owned operations.
“The move is aimed at giving the provincial insurance firms access to capital and an opportunity to leverage the best practices of a foreign insurance company,” a Beijing-based lawyer, who works with the CBIRC, was quoted as saying in the report.
Current regulations allow a foreign firm to own up to 15% in a local insurer. In the new rules being drafted, foreign firms will be allowed to possess more than one main business licence, the sources said.
In the past, it was very hard for foreign firms to invest in the Chinese insurance industry, which capped foreign ownership at 50% until very recently. This is despite the market being very lucrative to insurers, due to rising individual wealth and the low penetration of life insurance.
