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China seeks to increase ownership limit for foreign insurers

China life insurers
The move comes in an effort to open up the financial market to foreign investments

China aims to ease the situation for foreign life insurers seeking to acquire controlling stakes and major investments in domestic firms, media reports said. The move comes in an effort to open up the financial market to foreign investments.

The China Banking and Insurance Regulatory Authority is playing an active role in further building the plan. In fact, the plan also seeks to increase the capital of small and medium insurers in China especially with the adverse effects of the Covid-19 pandemic.

It is reported that new rules and requirements will be finalised in the second half of 2020. “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 told the media.

According to the current regulations, foreign firms operating in China can own up to 15 percent stake in a local insurance company. With the introduction of new rules these firms will be allowed to have more than one business licence, media reports said.

Last December, it was reported that China would allow foreign insurers to own 100 percent stake in local life insurers from January 1, 2020. “The removal of the ownership limit will give foreign investors the chance to buy out their local shareholders, which will give the foreign companies greater or full flexibility in determining and implementing their strategies,” according to á Fitch Ratings’ report published last December. “This should reduce internal conflicts as well as the cost of internal communication.”

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