Anbang Life Short-Term Products Barred by Insurance Regulator

(Beijing) – China’s insurance regulator ordered Anbang Life Insurance Co. Friday to stop selling several products that violate industry rules, according to a statement posted by the China Insurance Regulatory Commission on its website.

The life insurance company is part of Anbang Insurance Group Co., the third-largest insurer in China by assets and the owner of New York's Waldorf Astoria hotel. Anbang Life was ordered to stop selling several products including annuity contracts and universal life insurance policies. It was also suspended from offering new insurance products for three months, according to CIRC.

Anbang Life is among Chinese insurers that fueled a boom in sales of so-called "universal life insurance" -- a type of short-term policy that combines minimal protection benefits with a high-return investment. These products have become the major target of a government crackdown since late last year. Regulators are concerned that such products helped small insurers raise huge amounts of cash quickly to fund investments in bonds, securities and the property market, creating uncertainty for the insurers’ cash flow and liquidity management.

CIRC found that Anbang Life violated regulations concerning insurance products with short- and mid-term maturities. The regulator said one of Anbang Life’s annuity contracts was designed to offer quick returns to policyholders, shortening the actual maturity of the product to as little as two years. Such designs deviate from the basics of insurance protection, violate regulations and disrupt market order, the commission said in its statement.

CIRC ordered Anbang Life to work out settlements with existing policyholders for the banned products and to adjust its product development to comply with regulations.

Anbang Life reported a net cash outflow of 5.7 billion yuan ($830 million) in the first quarter of this year, according to a financial statement released in late April. Insurance industry analysts said the outflow indicates the company paid more to clients who redeemed or canceled policies than it generated from insurance premiums.

Anbang Life’s core solvency adequacy ratio dropped to 101.25% in the first quarter of 2017 from 117.65% in the last quarter of 2016. The ratio of a company’s core capital to the minimum capital required by regulators is a measurement of a company’s capability to cover liabilities.

By the end of 2016, Anbang Life had total assets of 1.45 trillion yuan, 60% of which were overseas, according to the financial statement.

Contact reporter Han Wei (weihan@caixin.com)