December 10, 2018

China will be back in focus for international players in 2019

Regulatory clarity clears a path for deal-making.

After three or more years of regulatory uncertainty in the world's second largest insurance market, calendar year 2018 saw the newly merged China regulator – the China Banking & Insurance Regulatory Commission (CBIRC) – issue a slew of new regulations, with a number of aims.

First, to encourage foreign-insurer controlling equity interests in CBIRC-regulated carriers, brokers and managing agents.

Second, to actively and explicitly prevent a single domestic shareholder from ever acquiring controlling equity interests in CBIRC-regulated carriers (with grandfathering exceptions remaining – tentatively – for existing circumstances).

Third, to clean up market misconduct by CBIRC-regulated entities and set significantly higher 'fit & proper' criteria for existing and prospective shareholders of CBIRC-regulated entities.

And finally, to set a new Rule 101 for CBIRC-regulated carriers:  Solvency, Solvency, Solvency (with greatly increased fines and punishment for deliberate or careless misrepresentation of a carrier's solvency position, by the carrier and/or its auditors/actuaries).

As a result, foreign insurer interest levels in China's insurance market are at their highest levels in many years, and we expect a number of significant and creative foreign insurer-invested transactions to emerge through 2019.

You can read the rest of our insurance predictions here.