How China Insurance Crackdown Could Rain on Deal-Making Parade

The Anbang Insurance Group domicile in Beijing, China, in Aug 2016.
ENLARGE

Life certain is removing worse for China’s unlisted insurers. That could have knock-on effects for China’s ardour for tellurian understanding making.

China’s word regulator this week doubled down with new manners restricting ultra short-term word products. It reined in activity that increasingly looked like high-risk investments to accelerate unlisted insurers’ money flows. That should stop a erosion in marketplace share that China’s incomparable listed insurers have faced over a past year. Shares in China Life,
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a biggest plant of a arise of a likes of Anbang and Huaxia Life, gained some-more than 4% Wednesday.

The Chinese Insurance Regulatory Commission is capping earnings on a products and augmenting payouts to policyholders. It’s also stamping out tricks used to foster lucrative, short-term policies, that can be only a month in duration—hardly a safe, steady, long-term products one routinely associates with life insurance.

Cash flows from these short-term, investment-like “universal products” have pushed Anbang’s marketplace share adult by 18 commission points given 2013, according to Citigroup
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0.40
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analysts. Anbang has used these products to fuel overseas merger bids: some were successful, others failed, like for Starwood Hotels,
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though many were audacious.

Starving insurers of a provender that fueled assertive forays into abroad investments means a magnitude of outsize Chinese bids might fade.

The new dribbling of manners has sent China’s large listed insurers, those losing marketplace share to their unlisted peers, adult an normal of 19% given July. The manners will take time to flog in, and these unlisted players are apt during building novel products. The unlisted lot could frame off some-more business, though for now, a incumbents are violence a upstarts.

Write to Anjani Trivedi during anjani.trivedi@wsj.com

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