China regulator inspects insurers’ investment risk controls -paper

China’s insurance regulator has launched an inspection of insurers’ risk controls over stock, private equity and real estate investments, the official Shanghai Securities News reported on Wednesday, citing unnamed sources.

The move comes as the country’s insurers report strong profits even as wider economic growth stutters and analysts warn of a pivot to riskier investments.

According to a note circulated this week, the China Insurance Regulatory Commission (CIRC) told insurers and insurance asset management companies that they plan to inspect investments in stocks, equity and real estate, in both onshore and offshore markets, the Shanghai Securities News said.

The CIRC was not immediately available for comment. It has also taken action previously to curb riskier investments by insurers.

China’s largest insurers, including Ping An Insurance and China Life Insurance saw profit growth last year of 38 percent and 8 percent, respectively, a show of strength when other financial institutions such as banks are seeing flat profit growth.

The insurers have also intensified their push to acquire assets abroad, with Anbang Insurance agreeing to buy German insurer Allianz’s South Korean businesses in April and China Life and China Taiping Insurance expressing interest in acquiring ING Life Insurance Korea, according to sources.

In a note on Wednesday, Fitch Ratings said Chinese life insurers are increasingly investing in debt-investment plans, project asset-backed plans, trust schemes and wealth management products that promise higher returns for greater risks.

The aim of the CIRC inspection is to prevent risks that may arise in the core business of insurance firms, with a focus on any illegal activity, insider trading, improper related-party transactions and the misappropriation of funds, said the paper.

The focus will be on elements of oversight such as the function of independent directors and compliance, it said.

Starting in June, each company will set up inspection teams which will conduct spot checks and other investigations. The CIRC will then review the reports and also conduct spot checks, the paper said.

China’s insurance firms raked in 2.4 trillion yuan ($364.18 billion) of premium income in 2015, up 20 percent from a year earlier, the industry regulator said in January. ($1 = 6.5902 Chinese yuan renminbi) (Reporting By Engen Tham; Editing by Muralikumar Anantharaman)


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