UPDATE 3-China eases M&A rules for insurers

Tue Apr 8, 2014 11:27am EDT
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(Adds industry comment)

SHANGHAI/HONG KONG, April 8 (Reuters) - China's decision to partially relax mergers and acquisition rules in the insurance industry could see global insurance firms expand their footprint in the $288 billion market.

Beijing would allow insurers, including Chinese-based units of foreign insurance firms, to buy stakes in more than one peer that competes in the same market segment, according to a statement on the China Insurance Regulatory Commission's (CIRC) website and dated last Friday.

The old rules prohibit insurers from buying stakes in more than one peer that competes in the same products.

The move marks another step in the gradual liberalisation of the country's vast insurance industry in recent years, which had seen restrictions that made it difficult for foreign insurers to achieve scale and exploit advantages in underwriting techniques.

"The new rules allow foreign insurers to acquire domestic Chinese insurers with a nationwide licence, a highly attractive way of achieving target distribution scale," said Maurice Williams, Managing Director for the Asia-Pacific, Middle East, Turkey and Africa at broker Willis Re.

"There is no doubt this transforms the investment potential for foreign insurers in China," Williams said.

The change would also allow stronger domestic and foreign insurers to invest in weaker peers.

"Some insurance players are not in such great shape, and this allows them to be taken under a warm and cuddly arm and nursed back to health by another insurer," said Keith Pogson, managing partner in financial services Asia Pacific at Ernst & Young.   Continued...