China Moves to Overhaul Supervision of $3.1 Trillion Insurance Industry
China launched a major overhaul of its insurance supervisory system to grant more power to local regulators in overseeing parts of the country’s 22 trillion yuan ($3.1 trillion) insurance sector.
The China Banking and Insurance Regulatory Commission (CBIRC), the national regulator, issued guidelines Tuesday for a supervisory shakeup affecting the country’s 87 property insurers and 13 reinsurance companies. The move renewed earlier efforts to decentralize regulation in the banking and insurance industries to improve efficiency.
The overhaul will reduce regulatory costs while freeing companies from redundant administrative procedures, said Zhu Junsheng, an insurance industry expert at the Development Research Center of the State Council. The previous concentrated supervisory system could discourage companies from making business innovation, Zhu said.
Under the new guidelines, the CBIRC will hand over regulatory responsibilities for 64 property insurers to local authorities. The top regulatory body will maintain direct oversight of the remaining 36 institutions, mainly large players with nationwide services such as PICC Property and Casualty Co. Ltd. and Ping An Property & Casualty Insurance Co. Ltd., as well as agricultural-focused property insurers, internet insurers and reinsurers.
The changes are part of efforts to better allocate regulatory resources and enhance coordination between local and national regulators, the commission said in a statement. The measures will improve supervision of property insurers and reinsurers and enhance market vitality, the CBIRC said.
Chinese insurers had total assets of nearly 22 trillion yuan as of the end of May, according to CBIRC data. Total assets of property insurers were 2.4 trillion yuan and of reinsurers 459 billion yuan. Premium income of property insurance firms totaled 501 billion yuan, 22% of the industry’s entire premium revenue.
The guidelines also outline measures for national and local regulators to share information and coordinate regulatory efforts.
China’s banking and insurance regulators previously tested decentralizing supervisory powers. But the efforts were suspended since the 2018 merger of the banking and insurance regulatory bodies into the CBIRC.
Zhu said the renewed reform started with the property insurance sector rather than the much larger life insurance sector, reflecting regulators’ prudence in making the changes. Zhu said he expects the reform to be expanded to the entire insurance industry at some point.
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