China Creates New Entity to Take Over Troubled Insurer Huaxia

Chinese regulators are creating a new insurer to take over the operations of Huaxia Life Insurance Co. after more than two years of state custody, the latest step to rein in financial risks.

(Bloomberg) — Chinese regulators are creating a new insurer to take over the operations of Huaxia Life Insurance Co. after more than two years of state custody, the latest step to rein in financial risks.

The China Banking and Insurance Regulatory Commission gave approval to the China Insurance Security Fund, an industry-funded body that bails out troubled insurers, and other investors to establish a new life insurer to take over Huaxia, a paper published by the watchdog reported Saturday.

The establishment marks a progress of risk resolving on the insurer, the report cited an unidentified senior official at CBIRC as saying.

Huaxia Life, along with its now-defunct rival Anbang Insurance Group Co., had been among the most aggressive buyers of stakes in other companies, as short-term, high-yield products fueled revenue growth.

As recently as 2018, Huaxia was China’s fourth-largest life insurer by market share. Later, China’s crackdown on risky products slowed its growth, and the pandemic further pummeled its operations.

The closely held insurer has been placed under temporary control since 2020, partly over its links to Tomorrow Group, the investment conglomerate owned by Xiao Jianhua. In 2018, China’s central bank identified Tomorrow as one of several financial holding companies that need to be scrutinized in their ownership structure, related transactions and source of funding.

The approach to Huaxia is similar to steps taken to resolve issues at conglomerate Anbang. The government seized control of Anbang in early 2018, and later created a new company called Dajia Insurance Group Co. to take over most of its businesses and sell off overseas assets.

The regulator didn’t disclose the shareholding structure of the insurer to be established for Huaxia.

–With assistance from Zhang Dingmin.

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