China authorizes first 100% foreign-backed insurance company
2020-01-22 14:10 Wednesday
Allianz (China) Insurance Holding Co., Ltd, has been approved by regulators in China, making it the first entirely foreign-owned insurance holding company to operate in the nation, according to the latest reports.
The move marks a major step toward the liberalization of the country's internal financial markets, say commentators.
Allianz (China) Insurance is based in Shanghai. Earlier this month it announced it had finally received official authorization from the China Banking and Insurance Regulatory Commission (CBIRC) to start operations.
The decision will enhance the company's financial and strategic flexibility to build on business opportunities, drive long-term success and further increase investments, said a spokesperson.
Sergio Balbinot, the company's chairman, remarked: "The regulatory approval for the holding company is an important landmark for our business. It puts us in a priority position to maximize on the opening-up of the Chinese economy."
The decision follows a series of measures announced by official regulators to encourage investment by financial institutions from abroad and further open up China's financial markets.
In July, the State Council's Financial Stability and Development Committee announced that by 2020 the country will remove caps on foreign ownership for futures companies, securities firms and fund houses. That would make it a year earlier than scheduled.
The quickening of the opening-up of financial markets in China will bring numerous benefits to foreign investors and the financial sector, experts predicted.
"By setting up a fully foreign-owned insurance holding company in China, foreign insurers can explore more business opportunities in research, investment, product design and customer service and compete with domestic insurance groups," said Wang Guojun, a professor from the University of International Business and Economics.
Solmaz Altin, CEO of the new holding company, announced, "With the new holding structure in place, we're able to better serve an expanding middle class with our range of financial solutions."
At present, only 12 domestic insurance groups account for over 70% of the income from premiums in the insurance sector in China.
Wang added: "We require more market participants in different types of ownership. A larger number of fully foreign-owned insurance holding companies and joint ventures will encourage learning from one another through competition.”
"Domestic insurers can learn from their foreign counterparts in terms of actuarial methods, risk management, and the establishment of firewalls between business segments within a group," he said.
Zhou Jin, a financial services consulting partner of PwC China, commented: "According to our observations, many financial joint ventures, in which foreign investors hold less than 50%, have some flaws in corporate governance.
"Under current policies, foreign stakeholders can have a controlling interest in a financial institution and set their strategic direction, so they will be more willing to increase their investments."
"However, if stakeholders disagree with each other in terms of strategy or operational objectives, it'll cause a swing of strategies for the joint venture and the senior management will be at a loss for what to do," he added.