Sat, Aug 02, 2003 - Page 11 News List

Beijing looking to restrict foreign insurers' growth


China plans rules on foreign insurers making new branches so expensive that only the industry's largest can afford to fully expand into the continent-sized country, a leading academic said yesterday.

If the new regulations are passed, foreign firms may have to amass up to500 million yuan (US$60 million) in registered capital, said Hao Yansu, a professor at the Central University of Finance and Economics.

"The move will make it more expensive for foreign insurers to expand in China but may also cut regulatory uncertainties for foreign insurers," he said.

Hao said the proposed rules are actually "raising the minimum capital threshold" for foreign insurers' expansion in China, limiting entry to large-cap companies.

The rules, drafted by the China Insurance Regulatory Commission, foresee a basic 200 million yuan requirement for registered capital, which is the same as the requirement under existing regulations.

But the amount will increase by 20 million yuan with the opening of each new branch, until the total reaches 500 million yuan with the 15th branch, after which no new capital increments will be needed.

While the new rules may surprise foreign insurers because of the tough requirements, at least they may introduce a degree of clarity where none existed before.

China failed to detail rules on new branches when it published regulations on foreign insurers just after it entered into the WTO in December 2001.

On the bright side, the proposed capital requirements for foreign insurers are no higher than requirements for domestic insurers, Hao said.

According to current rules applying to Chinese insurers, the minimum capital requirement for a nationwide insurance license is 500 million yuan.

Insurance was one of the hotly contested areas during the 15 years of negotiations that preceded China's entry into the WTO.

Before China became a member of the trade body, foreign insurers were only allowed to operate in Shanghai and Guangzhou.

The geographic limits are gradually being lifted and are scheduled to disappear entirely in December next year.

A total of 36 foreign insurers companies have entered the Chinese market to date, opening a total of 57 outlets.

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