China may relax limits on foreign life insurers

Fully owned subsidiaries could be allowed, giving more freedom for foreign insurers in the market

China may relax limits on foreign life insurers

Insurance News

By Gabriel Olano

China is looking at loosening restrictions on stake ownership limits by foreign life insurers in domestic firms in a move that could cause huge changes in the country’s insurance industry.
According to sources, the Chinese government may allow foreign entities to own more than 51% of life insurers, and possibly allow even wholly owned subsidiaries. If the plan pushes through, this could give international insurers’ market shares in China a huge boost, as most of them currently operate in a joint venture model.
Dayton Wang, an analyst at Guotai Junan International, told the South China Morning Post that this potential move is part of China’s efforts to introduce foreign capital inflow by relaxing shareholding structures, and bringing in more best practices and experience from overseas to the local insurance sector.

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“However, it could still be hard for a foreign player to adapt to the Chinese financial environment, even if allowed to control a higher stake holding, as we have seen from what happened in the banking and brokerage sectors,” Wang added.
Since China joined the World Trade Organization in 2000, it has allowed foreign life insurers to own up to 50% in joint ventures. However, several foreign companies have said that the current structure can hinder the full development of operations.
In 2007, the China Insurance Regulatory Commission disallowed AIG from converting its life insurance branch into a wholly owned subsidiary. Eventually, the group was restructured and emerged as the AIA Group.

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