Insurance Regulator Gets Risks Covered

China’s insurance regulator has laid out a plan to tackle the major sources of risk to industry over the next three years.

The China Insurance Regulatory Commission (CIRC) on Wednesday published a list of the major sources of risk and named the regulators responsible for taking the lead on tackling each one. Prominent risks included improper shareholding structures and inappropriate use of funds.

Every regulator named, including city and provincial-level insurance and inspection bureaus, is supposed to draft a road map with a timetable, listed priorities and people responsible for dealing with major risks in the industry, such as internal governance and related-party transactions.

The document emphasized that regulators need to identify industry risks and penalize perpetrators in a timely manner, saying that failure to do so constitutes “failure to fulfill one’s duties.”

On Tuesday, the CIRC rescinded its approval for shareholders of Chang An Property & Liability Insurance and Lian Life Insurance Co. to increase their holdings because they were found to be keeping the stakes on behalf of other investors.

The CIRC strengthened its supervision over shareholders’ backgrounds last year in a bid to rein in market manipulation and excessive leverage in the financial market.

In November, the CIRC announced that Kunlun Health Insurance Co. Ltd. had violated shareholding arrangements after a yearlong review of the Beijing-based insurer’s opaque ownership structure.

Chinese media reports cited business registration records showing that at least four shareholders of Kunlun Health were linked to Guo Yingcheng, the chairman of property developer Kaisa Group, and his relatives. The reports fueled questions about whether the companies are proxy shareholders that allow Guo and his family to exert absolute control over the insurer.

Kunlun Health was the fourth insurer that the CIRC pegged for shareholding violations amid regulators’ efforts to crack down on related-party transactions and the use of proxy shareholders to dodge regulations and obtain control over financial institutions.

In October, the CIRC issued letters to J.K. Life Insurance, Sino-Conflux Insurance Co. and Chang An Property & Liability Insurance Ltd. for suspected shareholding violations.

Contact reporter Liu Xiao (liuxiao@caixin.com)