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Chinese regulator may revoke insurers' licenses on investment rule violations

The China Insurance Regulatory Commission may revoke insurers' licenses if the companies violate investment rules by continuing to engage in aggressive takeovers and sales of universal life policies, Tencent Finance reported Dec. 13, citing CIRC Chairman Xiang Junbo.

Talking to a group of insurance companies' top officials in Beijing, Xiang said fixed-income assets, instead of nonfixed-income assets such as equities, should be a major part of insurers' investment portfolios.

The CIRC may issue additional rules to effectively supervise and regulate insurers' aggressive takeovers and sale of short-term, high-yield universal life policies, according to a transcript of Xiang's speech posted on the commission's website. The chairman also urged the insurance industry to stick to its insurance nature.

"Insurance institutions should be friendly investors in the capital market, not eyebrow-raising savages," Xiang said, adding that insurance capital should not be "a mudflow in the capital market." The CIRC will target insurance firms that favor a stock market speculation strategy, the chairman said.

Xiang's comments came after China Securities Regulatory Commission Chairman Liu Shiyu criticized some asset managers for using "questionable funds" for "barbaric" stock buyouts. In the following week, the CIRC suspended the universal life insurance business of Qian Hai Life Insurance Co. Ltd., also known as Foresea Life, for irregularities and banned Evergrande Life Insurance Co. Ltd. from stock investments. The two firms heavily used income earned from the sales of universal life policies for share purchases.

Xiang also said the CIRC will strengthen cooperation with the People's Bank of China, the China Banking Regulatory Commission and the CSRC on leveraged buyouts.