UnionPay to clamp down on insurance products

Jump in outflows prompts firm to bar purchase of products on a trial basis

Insurance News


Paul Lucas

The sale of insurance products overseas is about to come to an end at China’s bank card monopoly.
According to a Financial Times report, China UnionPay, which is the only clearing house for bank card transactions in the country, will clamp down on the use its debit and credit cards for the purchasing of insurance due to a leap in capital outflows from the country during the second half of the year.

The company outlined that it had “observed a significant increase in overseas transactions by cards issues from mainland China” – and that it would now block purchases of investment-linked products in Hong Kong for a trial period.

The report outlines that China’s insurers have enjoyed a surge in premium growth in recent years primarily due to demand from mainland customers. However, during the first half of the year Chinese customers appear to have crossed the border with new business surging among some of the world’s largest insurers such as Prudential and AIA in Hong Kong.

Capital outflow has reportedly surged during recent months with foreign exchange reserves dropping in China by $39 billion during the third quarter.

It is estimated that capital outflows from insurance products account for less than a percentage point of total capital outflows – but this steady stream has drawn the attention of the country’s foreign exchange regulator.

The UnionPay restrictions revealed over the weekend hit the share price of Hong-Kong listed insurer AIA Group on Monday morning, falling 7.2%, and later recovering to a 5.3% decline.

UnionPay was the main channel used by Chinese to purchase savings products, according to a research note from Nomura, suggesting the new rules are likely to affect Hong Kong’s premium business.

China’s foreign exchange regulator told banks on Friday that they were to intensify checks on foreign exchange transactions to ensure they were genuine and based on actual needs, as it seeks to stem the outflow of cash.

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Chinese curbs fail to slow Hong Kong insurance buying frenzy

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