China’s insurance giants have hit the brakes on their $100 billion buying spree following a regulatory squeeze on speculation and new limits on outbound capital.
Insurers like Anbang Insurance Group, Ping An Insurance and China Life Insurance – some of the most active buyers last year – haven’t made any acquisitions so far this year, Bloomberg reported.
Chinese investment has been behind some of the biggest New York City real estate deals in recent years, including Anbang’s notable purchase of the Waldorf-Astoria in 2015 for $1.95 billion.
But the clampdown hasn’t just affected real estate. Chinese insurers have not made any purchases in other markets such Internet and software companies, traditional energy and finance.
The China Insurance Regulatory Commission has come down hard on the industry in recent months as it pledges to curb systematic risks.
During a briefing in Beijing Wednesday, the country’s top insurance watchdog said the commission, “will never allow insurance to become a rich man’s club, let alone allow financial crocodiles to use insurance as their channel or hideout.”
Any insurer that “challenges the regulatory bottom line, tarnishes the industry’s image or harms the people’s interest” will be driven out of the market, chairman of the regulator Xing Junbo said.
Chinese companies are facing stricter reporting requirements when they want to convert yuan into foreign monies as the country gets tough on capital flight to prevent further weakening its currency.
The CIRC says insurers should focus on fixed financial investments as opposed to equities.
In December, the regulator suspended Foresea Life Insurance as it was involved in an ownership struggle with the country’s largest developer, China Vanke Co., which lost $10 billion in market value.
The CIRC says insurers’ overseas holdings still only make up 2.3 percent of their assets, far below the limit of 15 percent. [Bloomberg News] – Rich Bockmann