China will loosen its grips over foreign insurance companies who wanted to manage their joint ventures directly inside of the country, unnamed sources revealed to Reuters. The formerly strict Chinese regulators could even consider allowing them full ownership before 2019 ends, according to people familiar with the matter who refused to be named.
The Chinese regulators may release its final guidelines on how to qualify for the process by the first quarter of 2019, the sources stated. Applications from foreign insurance companies will be reviewed within the subsequent periods.
As soon as things are settled, foreign-owned joint ventures will then be allowed to diversify across Chinese provinces. The existing policies restrict foreign-owned insurance companies from doing so. They were also prohibited from owning a large part of their joint venture. For instance, Aviva Plc and Prudential have been operating in China for decades but they only own less than 10 percent of their respective joint ventures.
The move has been contemplated since November 2017. At the time, regulators said they will initially widen foreign ownership cap to 51 percent from 50 percent. With this new policy being planned, however, the cap will be removed altogether after three years.
Reuters additionally reported that the China Banking and Insurance Regulatory Commission is in the process of reviewing feedback regarding the updated policy. A consultation paper, seen by Reuters, hinted that foreign-funded insurer will be nonetheless prohibited from selling the equity within five years from its acquisition.
A few foreign-owned insurance ventures have already expressed interest to submit applications to expand their stakes in their businesses operating in China. Among these companies are Prudential Plc which is headquartered in Britain, Sun Life Financial Incorporation which is headquartered in Canada, and Hong Kong-based FWD Group owned by tycoon Richard Li.
Incidentally, the JD Group is reportedly selling its Hong Kong insurance business, the FTLife Insurance Co. Ltd, between $2 billion and $2.5 billion. The firm sought the assistance of Citigroup to manage the sale and bidding for FTLife Insurance.
In June, the Global Insurance Trends Analysis 2018 released by Ernst & Young, a multinational professional services firm in London, stated that mainland China is the major driver of growth of the life insurance industry in the Asia Pacific region and among emerging markets in 2016. The country is also expected to sustain the region's growth momentum all throughout 2017. China and India, meanwhile, are leading the growth of non-life insurance among the emerging markets.
