(Yicai Global) Dec. 7 – China’s insurance market regulator has stepped up its fight against what it calls “barbarian” insurers. After placing a moratorium on Foresea Life Insurance, preventing the company from launching new universal life insurance products, China Insurance Regulatory Commission (CIRC) has decided to send inspection teams to both Foresea Life Insurance and Evergrande Life, two big insurance companies in the market.
The team assigned to Foresea Life Insurance will be led by the regulator’s Development and Reform Department. The Finance Department will oversee the team at Evergrande Life. The CIRC teams will conduct on-site inspections in both companies, focusing on the effectiveness of corporate governance regulation, financial authenticity, insurance product compliance and capital operations compliance, the 21st Century Business Herald reported.
Any violations will be subject to serious punishment. China’s insurance regulator’s recent clamp down on irregular activities by insurance companies is aimed at effectively standardizing corporate governance, business development and investment activities by the insurance companies and maintaining order in the insurance market.
As a subsidiary indirectly owned by Shenzhen Baoneng Investment Group, Foresea Life Insurance has been in the spotlight ever since Baoneng bought shares in China Vanke Co. [SHE:000002] and launched a takeover bid for the company. To further complicate matters, Baoneng has recently fallen into a dispute with the management of CSG Holding Co. [SHE:000012].
Evergrande Life’s “share flipping” strategy has led to a disciplinary interview by the regulator, and the company has been publicly ordered to uphold the value-oriented, long-term, prudent investment principles of an insurance fund.
CIRC Vice Chairman Chen Wenhui recently commented that solvency and capital regulation would become the “Maginot Line,” and was doomed to fail if insurance companies get around regulation through a variety of financial products. It is illegal profiteering through regulation circumvention.