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A Chinese Insurer Says There Will Be Defaults and Unrest if the Country’s Regulator Doesn’t Loosen Up

By Kevin Lui
Chairman of Foresea Life Insurance resigns
--FILE--View of a branch of Foresea Life Insurance (QHL) in Shenzhen city, south China's Guangdong province, 5 November 2016. Yao Zhenhua is no longer chairman and a board member of Foresea Life Insurance, the company said in a statement on Monday (13 March 2017). The statement said Yao handed in his resignation on 1 March 2017. The board met and agreed to his request on 6 March 2017. Deputy chairman Zhang Jinshun was appointed interim chairman. China Insurance Regulatory Commission (CIRC) barred Yao from the insurance industry for 10 years for irregular market operations last month. The CIRC said that Foresea Life violated regulations and provided false information on its capital increase. Foresea Life, a subsidiary of financial conglomerate Baoneng, was suspended from selling its questionable high-return insurance service in December, after speculative stake buyouts in listed companies by heavyweight insurers. To contain financial risk, the CIRC sent investigation teams to insurance companies, including Foresea Life, to review their management, balance sheets, product and capital use. The CIRC said Foresea Life had stated that its shareholders had used their own fund for capital replenishment in November 2015, but an investigation revealed that the statement did not match the actual capital source. The CIRC said Yao was directly responsible for the false information.
Zhu Min - Imaginechina

A Chinese insurer has warned the country’s regulators of defaults in the billions and possible unrest unless it is allowed to launch new products again.

Foresea Life Insurance asked the China Insurance Regulatory Commission (CIRC) in a letter dated Apr. 28 to lift its ban, “in order to avoid inciting mass incidents by clients and localized and systemic risks, producing greater damage to the industry,” reports the Financial Times. It further warned that, with an expected redemption of $8.7 billion this year, the insurer might not be able to meet payouts without selling new products.

The CIRC slapped Foresea with the ban in December over its management of customer information and accounts, reports Reuters. It also barred the company’s chairman Yao Zhenhua from the insurance sector for 10 years in February, accusing the company of breaking rules on the use of insurance funds.

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Anbang, the fast-growing Chinese insurer known for notable acquisitions like those of the iconic Waldorf-Astoria in New York and Starwood Hotels, received a ban similar to Foresea’s this month, reports FT. The CIRC said Anbang’s sales tactics were “wreaking havoc” on the sector.