China publishes draft rules on perpetual bond sales by insurers

The main Chinese financial regulators have published draft rules governing the issuance of indefinite bonds by insurers in the world’s second largest insurance market.

The rules, issued by the People’s Bank of China and the China Banking and Insurance Regulatory Commission, aim to protect investors and improve capital recovery and risk resilience of insurance companies operating in China, reported Reuters. The rules also state that insurance holding companies are prohibited from issuing such perpetual bonds.

Since 2015, Chinese insurers have been allowed to sell bonds in order to raise capital and strengthen their reserves. With increasingly stringent solvency regulations and increasing capital requirements, regulators are opening up more options for insurers to raise capital and strengthen their resilience to market risks.

China’s insurance industry is undergoing several regulatory overhauls as it seeks to grow and become the world’s largest insurance market, overtaking the United States. Swiss Re estimated that China would overtake the United States in the mid-1930s.

To achieve this, Chinese regulators have abolished foreign ownership limits in several sectors, but also clamped down on several areas to promote sustainable growth and avoid risks.

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