The expansion tide of insurance institutions is gradually fading. On January 25, Chengdu Haoneng Technology Co.Ltd(603809) announced that it would terminate its participation in the establishment of Western Agricultural Insurance Co., Ltd. (hereinafter referred to as “western agricultural insurance”).
Chengdu Haoneng Technology Co.Ltd(603809) withdrawal from the establishment of insurance companies is not an isolated case. In the past two years, more and more listed companies that initiated the establishment of insurance companies have “backed out”. Insiders pointed out that the approval process of insurance license is long, and some institutions may give up due to changes in the internal and external environment and the company’s strategic adjustment.
capital “changed heart”, insurance “lost favor”
In the past two years, the enthusiasm of listed companies for applying for insurance licenses is gradually fading. On January 25, Chengdu Haoneng Technology Co.Ltd(603809) announced that since western agricultural insurance did not obtain the administrative license approval from the China Banking and Insurance Regulatory Commission during the preparatory period, the sponsors agreed to liquidate the preparatory work of western agricultural insurance and dissolve the preparatory group.
Chengdu Haoneng Technology Co.Ltd(603809) is the first listed company to announce the termination of equity participation and the establishment of insurance enterprises in 2022. However, according to the situation in the past two years, Chengdu Haoneng Technology Co.Ltd(603809) may not be the last listed company to withdraw from the preparation of insurance enterprises.
On January 26, the reporter of Beijing business daily made incomplete statistics. Since 2020, at least 11 listed companies, including Lionco Pharmaceutical Group Co.Ltd(603669) , Hainan Haiqi Transportation Group Co.Ltd(603069) , Beingmate Co.Ltd(002570) , Hainan Strait Shipping Co.Ltd(002320) , have announced their withdrawal or termination of the establishment of insurance companies. Among the insurance companies that “miscarry” without a “birth certificate”, there are not only life insurance and property insurance companies, but also health insurance and agricultural insurance companies.
Turning to the reasons for the withdrawal, a number of listed companies mentioned regulatory factors such as the approval process and the application and approval path in their announcements. Some companies said that the withdrawal preparation is difficult to guarantee the expected return on investment. Hainan Haiqi Transportation Group Co.Ltd(603069) has clearly pointed out that the withdrawal from the establishment of Haijin property insurance is due to the long period of preparation and approval.
Why do listed companies “retreat” in the process of establishing insurance companies? Li Wenzhong, deputy director of the insurance Department of Capital University of economics and trade, pointed out that the prospect of China’s insurance market is widely recognized. However, due to the large number of queues for applying for the establishment of insurance companies in recent years, few have been approved, and the opportunity cost for participating institutions is too high. Secondly, some institutions may give up due to changes in internal and external environment and strategic adjustment of the company during long-term waiting. In addition, for listed companies, the pressure on operating performance is greater. At present, there is too much uncertainty about the results of applying for the establishment of insurance companies, and some companies decide to give up after weighing.
stricter supervision and “internal volume” of the market
Behind the withdrawal of listed insurance companies from preparing to build insurance companies, in addition to the adjustment of the initiator’s own strategic layout, a series of measures under strict supervision of the regulatory authorities also made some companies retreat.
The measures for equity management of insurance companies further strengthens the equity supervision of insurance companies, and puts forward strict requirements on the access of insurance company shareholders, equity structure, capital authenticity, penetration supervision and so on.
In the past two years, the CBRC has also been more cautious in the examination and approval of insurance licenses. In 2017, there were as many as 12 insurance companies approved for construction in China, and only one national endowment insurance company was approved for construction in 2021.
The primary consideration for the stricter market access of insurance companies is that the existing market subjects have been under great pressure. Many industry insiders said that the current insurance industry is in a downward cycle. According to the latest data released by the CBRC, the insurance industry achieved an original premium income of 2.49 trillion yuan in 2021, a year-on-year decrease of about 0.8%.
Insurance companies of different sizes are facing fierce market competition. A life insurance company responsible for product development actuaries told Beijing Business Daily reporter that the insurance market was too serious in recent two years. He make complaints about it: “it is hard to develop a product on-line, but found that a few days ago other insurance companies also went on a similar product, the responsibility is wider than you, the premium is lower than you.”
The emergence of some “poor students” and “problem students” also makes the regulatory authorities more cautious. At present, four insurance companies have been taken over by the CIRC. Insiders pointed out that the improper intervention of a small number of insurance company shareholders, dominance of one share, illegal related party transactions, and even misappropriation of insurance funds have seriously disrupted the insurance market, leaving many hidden diseases.
Li Wenzhong pointed out that the current financial and insurance industry has always emphasized strict supervision and risk prevention, and regulating the number of insurance institutions entering the insurance market is the need to strengthen insurance supervision, standardize insurance market behavior and prevent industry risks.
How difficult is it to set up an insurance company?
Although there are many quitters, many companies are still waiting for the issuance of the “birth certificate”. According to the official website of China Insurance Industry Association, about 25 companies are listed in the column of pre disclosure of insurance companies, including Zhongyuan life insurance, Xinjiang property insurance, etc.
However, it is not easy for an insurance company to start preparation and open its business. In the early stage, it needs to invest a lot of funds and manpower. In addition, it is faced with a long approval process and a possible change in the approval path, Beingmate Co.Ltd(002570) withdrew from the preparation of Huada health insurance due to the change of the approval path. In August 2021, Beingmate Co.Ltd(002570) announced that it withdrew from the establishment of Huada health insurance due to significant changes in the reporting and approval path of government departments and matters involved in health insurance business.
In terms of access conditions, according to the requirements of the insurance law, the main shareholders of insurance companies should have continuous profitability, good reputation, no record of major violations of laws and regulations in the last three years, and the net assets should not be less than 200 million yuan. These conditions are not empty. In 2017, China Arab life was “rejected” by the former CIRC because of the poor financial situation of Ningxia Yipin, the main sponsor.
Even if the initiating shareholders are qualified, the insurance company to be established must have a minimum registered capital of 200 million yuan and must be paid in capital; In addition, the regulation also requires a clear company business plan and a clear profit model. Suning and other companies’ joint application for Tianlun life was rejected because of the unclear positioning of Tianlun life’s development model.
After shareholders and funds are in place, human resources must also “keep up”. The insurance law stipulates that the establishment of an insurance company should have directors, supervisors and senior managers with professional knowledge and business experience. According to the requirements of the regulations on the administration of the qualifications of directors, supervisors and senior managers of insurance companies, relevant personnel shall be familiar with insurance laws, regulatory regulations and industry self-discipline norms, and have the necessary knowledge, experience and ability to perform their duties. The CBRC shall test the insurance laws and regulations and relevant knowledge.
Why is the market access of insurance institutions so strict? Ning Wei, vice president of the school of economics of Beijing University of technology and technology, pointed out that considering the relatively special insurance products and the higher requirements for the sustainability of consumer protection, insurance has higher barriers than ordinary enterprises.
Li Wenzhong believes that the reason for implementing a strict licensing system for insurance is mainly because the success or failure of insurance institutions has a great social impact, which is directly related to social stability and public interests.
With so many institutions waiting for licenses, is the approval of insurance licenses expected to open significantly in the future? Li Wenzhong said that according to the current market environment, in order to protect the existing market players and maintain the healthy development of the industry, it is difficult to predict that the approval will be greatly relaxed in the short term.
