According to a statement on its website, the China Insurance Regulatory Commission’s (CIRC) most senior official Xiang Junbo said insurers need to “return to basics” and stick to their main business of selling insurance instead of investment products.
CIRC has repeatedly warned insurers against the risks of selling high cash-value short-term universal life insurance products as well as short-term trading.
“Insurers must stand fast to their main business, return to basics and give full play to risk sharing and loss compensation, and build a national risk protection net. They must be guardians of financial security, rather than creators of financial risk,” said Xiang
New rules
He said that the watchdog plans to roll out new rules to reduce the proportion of insurance funds allowed to invest in stocks. It will also intervene if insurers make frequent share purchases.
The regulator will also seek to further cut how much a single shareholder can own in an insurer, as it steps up supervision on insurers’ shareholding structure to combat the spate of aggressive acquisitions in recent years.
“Insurers have to be providers of long-term funds, not short-term speculators.”
“Insurance companies must work hard to be friendly investors in the capital market, and must absolutely not become savages, and not let insurance funds become the debris flow of the capital market,” said Xiang.
High-profile suspensions
Last week, the watchdog announced it had suspended Evergrande Life, the insurance unit of the country’s largest property developer, China Evergrande Group, from investing in stocks, accusing it of short-term trading that violated investment rules.
On the same day, Foresea Life, a subsidiary of Chinese financial conglomerate Baoneng Group, said it would reduce its shares in developer China Vanke after months of aggressive stake building. The firm has also been wrapped on the knuckles for market speculation.
CIRC also suspended the online sales of universal life insurance products issued by seven insurers including Foresea Life Insurance, and Evergrande Life.
‘Barbaric’ insurers
In his harshest criticism of the insurance industry to date, Xiang accused insurers of behaving like “barbarians” over their conduct during acquisitions and said their share buying has been mostly speculative and has disrupted market stability.
