Latest regulatory trends on the use of insurance funds

Since the second half of 2015, insurance funds have become one of the few “hot spots” in the capital market. Insurance companies frequently buy the shares of listed companies, which not only leads to the resistance by the management of some of these listed companies, but also gives rise to the criticism of investors. The regulatory authorities take this problem seriously and make public comment about the issue. This article summarizes and explains the regulatory rules and trends on use of insurance funds in 2016 (especially universal insurance funds).

On 28 December 2016, the China Insurance Regulatory Commission (CIRC) issued on its official website the Notice on Further Strengthening the Supervision of the Universal Insurance and Promoting the Development of Universal Insurance in an Orderly Way, in which it decided to “suspend the internet insurance business of Huaxia Life Insurance and Soochow Life Insurance and prohibit them from product application within three months due to their failure to make proper rectification of universal insurance”. The notice also emphasizes that, “The CIRC will study and improve the regulatory system, fully implement the current policies to strengthen the monitoring and guidance on major companies, and impose tough supervisory measures on the offending companies to regulate the market order.” The notice reiterates the policy philosophy and regulatory cornerstone that the “insurance industry should focus on the insurance business”.

The notice not only responds and implements the principle that “the insurance companies should focus on the insurance business, and the CIRC should focus on the supervision”, but also confirms the application of the supervision means and trends about the insurance funds (especially the universal insurance funds) since 2016.

Jason Xia is a partner at Wintell & Co