AIA Obtains the First Fully Foreign-Owned Life Insurance Licence in China
AIA received the CBIRC's approval to convert its Shanghai Branch into a wholly owned subsidiary on 19 June 2020. This marks the establishment of the first 100% foreign-owned life insurance company in China. Foreign life insurers were previously only allowed to hold maximum 50% (and until very recently, 51%) in a life insurance company in China, while for P&C insurance, 100% foreign shareholding has been allowed not long after China's accession to the WTO.
The 50% foreign shareholding limit in life insurance companies has been considered one of the major reasons for the slow development of foreign life insurers' business in China. The 50-50 shareholding structure often results in issues such as frequent change of management team and low efficiency in business operation.
For historical reasons, AIA set up in China in the form of a branch (instead of a joint-venture subsidiary). It is the only foreign life insurer operating in the form of a branch in China and therefore it has been able to maintain its independence in business operation. However, AIA has been long struggling with the “branching out” issue due to its corporate structure and thus limited geographical presence.
In April 2018, during Boao Forum for Asia, Chinese officials first gave plans and timetables for the further opening up of the country's financial sector. In terms of life insurance companies, it was proposed that maximum foreign shareholding would be increased to 51% and then there would be no foreign shareholding limit in 3 years.
On 30 September 2019, the State Council amendedAdministrative Regulation of Foreign-Invested Insurance Companieswith immediate effect. The market entry requirements (which also apply to foreign life insurers) such as “30-year operational period” and “2-year representative office” were removed from the amended legislation.
On 29 November 2019, CBIRC amendedImplementation Rules of the Administrative Regulation of Foreign-Invested Insurance Companies, which increased the maximum foreign shareholding in a life insurance joint-venture to 51%.
On 6 December 2019, CBIRC releasedNotice Concerning Clarification of the Timeframe for the Cancellation of Foreign Ownership Restrictions on Joint-venture Life Insurance Companies, officially lifting the shareholding cap on foreign ownership of joint-venture life insurance companies from 1 January 2020.
In line with the removal of foreign ownership restrictions, AIA became the first foreign life insurer to submit an application to convert its Shanghai Branch into a wholly-owned subsidiary and obtained CBIRC's approval on 19 June 2020. AIA China is now able to further open up branches across the country.
On 4 May 2020, HSBC Insurance (Asia) Limited also announced that it has entered into an agreement to acquire the remaining 50% equity interest in HSBC Life Insurance Company Limited from its joint venture partner, The National Trust Limited. The transaction is still subject to regulatory approvals.
In 2019, the life insurance sector in China realised an insurance premium income of 2,275.4 billion yuan, an increase of 9.8% year-on-year. The large population, low insurance penetration and rising individual wealth make the Chinese life insurance market a lucrative place for foreign players.
It is predicated that the ease of policy will offer vast opportunities for foreign life insurance companies looking to access or expand market share in China.
related lawyers
Yang Xueqian
partner
carrie.yang@weaflegal.com
