The Chinese insurance regulator is considering an industry shake-up that could see the biggest and most solvent firms resuming an overseas expansion, while smaller, riskier insurers would come under tighter scrutiny, reported Reuters.
The plan being discussed would see CIRC move from a one-size-fits-all regulatory framework to a regime calibrated to insurers' assets, solvency ratios and risk tolerance, four people with knowledge of the talks told Reuters.
Several larger insurers have lobbied the regulator to take a more tailored approach when applying the rules, arguing they should not be subject to the same investment restrictions as their smaller, riskier rivals, two of the sources said.
The new approach would form part of a broader push by the CIRC to clean up the world's second largest insurance sector amid concern that rampant expansion by many smaller firms has caused rising systemic risk in the financial sector.
The proposal is in its early stages and it is unclear when it might be implemented, said the sources, who declined to be named because the discussions are private.
Chinese insurers have snapped up billions of dollars worth of assets overseas and at home in the past two years to counter falling investment yields at home. Many have funded their expansion with cash from selling opaque investment-linked wealth management products, increasing companies' balance sheet risk.
Outbound M&A deal volume by Chinese insurers doubled last year to US$11 billion, after growing at a similar pace in 2015, according to Thomson Reuters data.
But concern over the balance sheet risk, and a crackdown on capital outflows, has made it tougher for insurers to win government approval to deploy fresh capital abroad over the past six months, causing uncertainty about their ability to do more outbound deals.