China’s insurance watchdog issues draft ruling on FDI in sector

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China issued a draft ruling yesterday, clarifying the criteria for foreign investors seeking to buy stakes under 25 percent in domestic insurance companies.

According to an announcement on the China Insurance Regulatory Commission’s website, overseas investors in Chinese insurance companies must have more than US$2 billion in assets and have made profits for three consecutive years. They must also have gained a credit rating of more than A level from an international rating firm over three years.

Foreign investors cannot sell their stakes within three years of delivering the capital, and that capital must be hard currency, as investors are banned from financing acquisitions through loans. A single investor may only hold 20 percent of a domestic company the news release said, and domestic insurers must first get approval from the CIRC before selling shares to foreign investors.

If approved, the new ruling will replace the 1999 law governing domestic investment in insurance companies.

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