Foreign insurers to step up expansion in China life market

Written by Adam Cadle

02/01/2020

The removal of a cap on foreign ownership in Chinese life insurers will spur international insurers to expand in the segment, Fitch Ratings has said.

The China Banking and Insurance Regulatory Commission will allow foreign investors to raise their stakes in life insurance companies to 100% from 1 January 2020, from the current 51%.

Fitch expects the removal of the ownership cap to enhance the effectiveness of foreign-owned insurers in formulating and executing their business strategy in terms of product offerings, risk management, asset-liability management, corporate governance and investment allocation approach. Prior to H119, foreign ownership in life insurance companies in China was capped at 50%.

Foreign life insurers generally focus on margin and value creation and are more prudent in risk management. The removal of the ownership limit, according to Fitch, 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.

“This should reduce internal conflicts between foreign and local shareholders as well as the cost of internal communication,” Fitch has said.

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