Chinese Goverment to have a say in insurance joint ventures

Party committees to monitor foreign insurers and influence company decisions

Chinese Goverment to have a say in insurance joint ventures

Insurance News

By Gabriel Olano

The ruling Communist Party of China will revive its practice of having “party committees” within foreign insurance joint ventures in the country, according to industry insiders.

The Party seeks to have a larger role in the leadership of these foreign-backed companies in order to keep them in line with the Chinese government’s goals for the sector, the sources told the Financial Times.

Several global insurers, including Aviva, AXA, Chubb, Generali, Manulife, and MetLife, have partnered with Chinese firms to gain access to the huge and growing market, but not all of their Chinese partners are insurance companies.

The government also seeks to reinstate inactive committees, which are composed of executives with strong allegiance to the Communist Party, into state-owned corporations to further strengthen its representation in the business sector.

Once a committee in a joint venture is active, it will gather information, monitor the behaviour of party members, and review major decisions undertaken by the company.

A senior manager at a foreign insurer told FT that he was concerned that the committee might undermine the foreign group’s business objectives. Meanwhile, another executive at a global insurer said that the committee is “part of doing business with China”.

Other managers have reported that the committees have become more active lately and are providing input into running the companies.

The Chinese government has expressed a desire to more than double the country’s insurance penetration, or insurance premiums as percentage of GDP, targeting 5% by 2020. Nic Nicandrou, CEO of Prudential Asia, said that if China achieves this goal, it would become a larger insurance market than the US.

However, foreign insurers haven’t found much success in China, with a combined market share in the single digits and falling, while domestic names such as Ping An and China Life rule the roost.

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