Prudential’s new chief executive officer Anil Wadhwani has welcomed the latest round of financial reforms in China, saying the changes would add to the strength and soundness of the country’s regulatory system and create better conditions for the insurance sector.
The remarks came as China announced at the Two Sessions - its annual plenary parliamentary meeting this week - that it will overhaul the country’s financial regulatory bodies.
This includes replacing the current China Banking and Insurance Regulatory Commission (CBIRC) with a new financial oversight body that falls directly under the supervision of the State Council, China's cabinet.
“These steps, we believe, are not only going to add to the strength and the soundness of the regulatory systems on China mainland, but also augur well to create longer-term sustainable value for both our customers and our shareholders,” Wadhwani, group CEO at Prudential, told a press conference following the release of its annual results on Wednesday.
To dismantle the CBIRC, the new regulatory body, called the National Financial Regulatory Administration, will be established on the basis of the CBIRC but will add certain functions of the People's Bank of China (PBOC) and the China Securities Regulatory Commission (CSRC).
The new body will be in charge of regulating China’s financial industry with the exception of the securities sector.
The move marks China’s biggest institutional reform in the financial sector since 2018, when it merged the regulators of the banking and the insurance industry.
The establishment of the National Financial Regulatory Administration effectively elevates the regulator for the insurance industry from being a public institution under the jurisdiction of the State Council to an organisation directly under the cabinet control.
“To level up the CBIRC and broaden the scope of regulation is a positive development for the industry, which means we will get more attention from the State Council,” said Lilian Ng, managing director of the strategic business group of Prudential, who is responsible for the insurance operations in Greater China.
“It means that the State Council will attach greater importance to the banking and insurance industries,” Ng told AsianInvestor.
“After all, insurance is a tightly regulated industry, and will continue to be so. So the reform’s impact on the industry is not going to be huge,” she added.
Prudential announced its 2022 full-year result on Wednesday, the first full year report for the group as an Asia and Africa-focused business. It reported an 8% operating profit growth in 2022, up to $3.38 billion from $3.23 billion in 2021.
Among the Asian and African markets in which it operates, mainland China was the third-largest profit generator in 2022 behind Hong Kong and Singapore.
Its insurance business in mainland China operates under the Citic-Prudential Life Insurance joint venture (JV).
Mark FitzPatrick, Prudential’s former CEO, said earlier in 2022 that the British life insurer still had an interest to increase its current 50-50 ownership of the JV.
As the new CEO, who just started his role on February 25, Wadhwani said on Wednesday that he believed the JV they have in China was strong and “very well positioned” to address what he described as the “under-penetration” of China's healthcare needs.
“Looking forward, I believe the growth opportunities in China mainland are immense because the structural demand drivers are very much in place. We would be excited and ready to invest more capital to support our growth plans on the China mainland,” Wadhwani said.