(Repeats article first published on Sunday. No changes to
* CIRC discussing loosening rules for large insurers -
* Changes would allow bigger firms more M&A
* Smaller, riskier insurers to come under greater scrutiny
* Plan follows lobbying by large firms eyeing overseas
By Sumeet Chatterjee and Julie Zhu
HONG KONG, March 5 China's insurance regulator
is considering an industry shake-up that could see the biggest
and most solvent firms resuming an overseas expansion, while
smaller, riskier insurers would come under tighter scrutiny.
The plan being discussed would see the China Insurance
Regulatory Commission (CIRC) move from a one-size-fits-all
regulatory framework to a regime calibrated to insurers' assets,
solvency ratios and risk tolerance, four people with knowledge
of the talks told Reuters.
It forms part of a broader push by the CIRC to clean up the
world's second-largest insurance sector amid concern that
rampant expansion by many smaller firms has caused rising
systemic risk in the financial sector.
Chinese insurers have snapped up billions of dollars worth
of assets overseas and at home in the past two years to counter
falling investment yields at home. Many have funded their
expansion with cash from selling opaque investment-linked wealth
management products, increasing companies' balance sheet risk.
Outbound M&A deal volume by Chinese insurers doubled last
year to $11 billion, after growing at a similar pace in 2015,
according to Thomson Reuters data.
But concern over the balance sheet risk, and a crackdown on
capital outflows, has made it tougher for insurers to win
government approval to deploy fresh capital abroad over the past
six months, causing uncertainty about their ability to do more
Several larger insurers have lobbied the regulator to take a
more tailored approach when applying the rules, arguing they
should not be subject to the same investment restrictions as
their smaller, riskier rivals, two of the sources said.
Ongoing M&A deals with potential Chinese bidders include
Australia and New Zealand Banking Group's sale of its
more than $3 billion life insurance and wealth business,
investment bankers say, and Chinese insurers have also shown
interest in buying Hong Kong Life Insurance Ltd, one of few
independent life insurers in the financial centre, which could
fetch $600 million.
Chinese insurers have also been looking to buy hotels and
other real estate assets from New York to London to find steady
and higher yields.
Under the new regime being discussed, the CIRC plans to look
more favourably on large, solvent insurers including China Life
Insurance Co Ltd and Ping An Insurance Group Co
and support their expansion plans, both at
home and abroad, the people said.
Smaller insurers will face tougher scrutiny when trying to
expand overseas or domestically.
"The insurance companies have to increase their investment
yields, and there are some that are considering using assets to
do offshore M&A," said Martin Tam, an insurance partner at law
firm Baker McKenzie in Hong Kong.
"But it will depend on the requisite regulatory approvals
which, in turn, will depend on the companies – how strong are
their solvency ratios and if those investments are prudent."
The proposal is in its early stages and it's not clear when
it might be implemented, said the sources, who declined to be
named because the discussions are private.
The CIRC, China Life and Ping An did not respond to requests
Chinese insurers can invest up to 15 percent of their assets
A sharp drop in the yuan, low interest rates and sluggish
stock markets have sent firms including Ping An, China Life and
Anbang Insurance Group hunting for assets from the United States
Those overseas manoeuvres took a hit after China began
tightening rules for taking capital outside the country, to stem
a gradual slide in its foreign exchange reserves.
The CIRC plans to cut the 15 percent overseas investment
threshold to low single-digits for firms that have weaker
solvency ratios and face asset and liability mismatches, two of
the people said.
(Reporting by Sumeet Chatterjee and Julie Zhu, with additional
reporting by Raffaele Ruohong Huang in HONG KONG; editing by
Michelle Price and and Ian Geoghegan)