(Yicai Global) Aug. 5 -- Chinese regulators may require embattled Sino-French Life Insurance, a joint venture set up by China Post and France’s CNP Assurances, to file for bankruptcy or could take control of the insurer due to the firm’s weak capacity to cover its liabilities.

Sino-French Life Insurance's comprehensive solvency adequacy ratio had fallen to 22,688 percent below zero at the end of June, The Paper reported, citing a report from the Shenzhen-based company yesterday. The ratio was 18,227 percent negative at the end of the first quarter.

Under a proposed new regulation, which is currently open for public feedback, the China Banking and Insurance Regulatory Commission could force insurers that fail to meet solvency requirements to file for bankruptcy or even take over the firm. The rule would require the core ratio to be no less than 50 percent, the comprehensive ratio to be at least 100 percent and the risk rating to be at least B.

Sino-French Life was established as a 50-50 joint venture and China Post sold its stake to private equity firm Cathay Fortune in 2009. Issy-les-Moulineaux-based CNP still owns a 25 percent share of Sino-French Life, but if the JV's latest capital increase was approved its shareholding would drop to 3.3 percent. 

The JV tried to increase its capital by CNY1.3 billion (USD186.9 million) in August 2017, but the CBIRC has not yet approved the request, the target firm said earlier. 

The JV made CNY70,630 (USD10,117) in revenue in the first half, with a net loss of CNY27.6 million (USD4 million). In the first quarter, its risk rating was at level D. 

Editor: Emmi Laine