Chinese Insurers Ordered to Rectify Financial Mismanagement by Year-End

China’s insurance regulator is asking insurers to rectify a wide range of problems in their multitrillion-dollar investments by year-end, after a routine round of inspections revealed compliance failures in a number of insurance institutions, according to an official document seen by Caixin.

The China Banking and Insurance Regulatory Commission (CBIRC) said it had found misuse of insurance funds, which can be invested in various types of assets, including stocks, bonds, and bank deposits. As of the end of September, the industry’s outstanding insurance funds reached 22.4 trillion yuan ($3.5 trillion), official data show.

The problems highlighted in the document include illegal investment in residential properties and unlisted property developers, illegal financing for real estate projects, as well as shareholders or actual controllers interfering with the use of funds, misappropriating funds, and concealing related-party transactions through layered operations.

The majority of the problems haven’t been completely tackled, and some insurers even took managing the risk issues lightly and were slow to address them, the document said.

To address these problems, the CBIRC launched a new regulatory campaign to get insurers to curb activities associated with illegal use of funds, and improve the quality of their assets to contain risks.

For investments that are losing money, the CBIRC said insurers should take stock of the losses, take necessary measures to get compensated, and dispose of risky assets. Insurance institutions should also carefully manage their future investments to minimize losses.

The CBIRC said insurers should, in principle, complete the rectification of their problems by the end of 2021, and warned further measures ranging from subjecting errant firms to industry scrutiny to administrative penalties.

Contact reporter Zhang Yukun (yukunzhang@caixin.com) and editor Bertrand Teo (bertrandteo@caixin.com)

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