Germany's Allianz has won approval to set up the first wholly foreign-owned insurance holding company in China, in a move that opens up the mainland insurance industry earlier than initially scheduled and which has been seen as politically motivated.
Allianz said it expected the Shanghai-based company to be established in 2019 and that it would help enhance the firm's strategic flexibility to expand investment and growth in China.
The move makes sense as the firm has been searching for a solution to its mainland distribution strategy, said a Hong Kong-based consultant on the insurance industry.
The approval has come much earlier than expected and reflects accelerating easing of the regulations. China first announced the relaxation of ownership limits for foreign firms in the wake of US president Donald Trump’s visit in November last year.
The CBIRC said at the time that foreign firms would be allowed to own up to 51% insurers after three years, with that limit being removed after five years. Then, announcing more detailed rules on the opening of the financial sector in April, the watchdog said that 51% cap would be removed in three years.
Meanwhile, Reuters reported on November 19 that China would accept applications early next year from foreign insurers seeking to take control of their local joint ventures and may publish its final guidelines on the process as early as the first quarter of 2019.
The Shanghai-based chief investment officer at a mainland insurer told AsianInvestor that he believed China’s decision to grant early approval to Allianz was politically motivated.
Beijing is very likely to advance its plan to open up the economy amid the intensifying trade tensions between China and the US, with the aim of making the China market more internationalised and winning over Trump’s traditional allies, the CIO said.
Indeed, in a statement upon winning the approval, Allianz emphasised the bilateral relationship between China and Germany. Oliver Bate, group chairman and chief executive, said the announcement “follows the positive long-term cooperation" between the two countries.
AsianInvestor reported in April that Allianz was in talks with the Chinese authorities “to advance its growth agenda in the market, including plans to set up a holding company in Shanghai”. The firm already has a JV with local investment manager Citic Trust – Allianz China Life, which was set up in 1999.
Other foreign institutions, including insurers, asset managers and wealth managers, are also making plans to boost their presence in China since the relaxation in ownership rules was announced.
Canada’s Manulife had told AsianInvestor that it may seek to establish a wholly-owned life insurance unit in China, following initial steps by rivals Allianz and FWD. UK insurer Prudential’s Asia CEO has also said in May that the firm would prioritise China as part of its own regional expansion plans.
Moreover, firms including JP Morgan, Nomura and joint venture ICBC-Axa have applied for or obtained approval to expand their footprints in China, following various strategies.
International players such as Allianz will help the Chinese insurance industry to develop and to adopt international standards around areas such as investments, products and asset-liability management (ALM). The mainland authorities are phasing in new rules around risk capital – the China Risk-Oriented Solvency System – and, as part of that, around ALM; areas that European insurers are already very well versed in.
As for the next steps, CBIRC said on November 25 it would steadily open up the financial sector while enhancing risk prevention and regulatory capabilities in accordance with President Xi Jinping’s plan to ease market access, as mentioned at the first China International Import Expo held this month.