Asia Pacific Insurance

China

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Insurance Regulatory Landscape and Key Considerations for M&A Transactions
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Insurance Regulatory Landscape and Key Considerations for M&A Transactions Start Comparison
Who is the main regulator with oversight of insurance companies?

China Banking and Insurance Regulatory Commission (CBIRC)

Are there foreign ownership limitations for insurance companies? Are there shareholding caps on individuals and/or corporate bodies for insurance companies? If in the affirmative, is this encapsulated within statute or a matter of policy?

There is a maximum foreign ownership of 51% for life insurers (by law), and the restriction on foreign stakes will be canceled in 2021. There is no cap on foreign equity for general insurers. The law does not provide for individual shareholders for foreign-invested insurance companies.

Can an insurance company carry on a composite business (i.e., life and non-life)? Is this encapsulated in statute or a matter of policy?

No (the law does not provide for composite license).

Are there other conditions imposed by the regulator in doing an M&A transaction?

The CBIRC requires the applicant to have the following:

  • More than 30 years of established experience in the insurance industry
  • A representative office in China for two years
  • Total assets of USD5 billion
Is dispensation given for fulfillment of these conditions and in what circumstances?

Generally no.

Is there a single presence policy and is it imposed under statute or policy? Is dispensation given and what criteria will the regulator consider?

Yes.

Generally there is such a policy for each of life and non-life businesses.

What approvals are required for a foreign entity to take a stake in an insurer? Is there a distinction between a share deal or an asset deal?

CBIRC approval is required for a share deal or an asset deal. There is otherwise no distinction from a regulatory perspective between a share deal and an asset deal.

How long will regulatory approvals typically take for a share deal versus an asset deal?

Regulatory approvals vary on a case-by-case basis. They can take a few months to more than a year.

How open is the regulator to private equity participation in an insurer?

There is no statutory prohibition. Foreign investors need to possess relevant insurance experience.

Is there a financial holding company concept (FHC) or other equivalent status? What are the implications?

There is no FHC concept for insurance companies.

A foreign insurer must satisfy the entry requirements before it can set up a JV or a wholly owned subsidiary in China. Such requirements include capital, insurance experience and having a representative office for two years in China.

What are the typical modes of distribution for insurance companies?

Bancassurance, agency force and brokers

Is bancassurance a popular mode of distribution? What approvals are required? What are the main parameters in negotiating a bancassurance agreement?

Yes, bancassurance is a popular mode of distribution.

CBIRC approval is required.

The salient terms are:

  • Exclusivity
  • Products
  • Remuneration
  • Risk allocation

 

What are the top challenges in closing an insurance M&A transaction (share deal versus asset deal)?

Share and asset deals

  • Regulatory approval
  • Price
  • MAC clause

Asset deal

  • Transfer of all other business undertakings
  • Transfer of employees
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