China Raises Equity Limit in Local Insurers to Lure Investors

China will allow shareholders in the country’s insurers to own stakes as big as 51 percent, increasing the limit to attract strategic investors and boost the industry’s capital strength.

The combined holdings of a single investor and its affiliated parties can exceed 20 percent if it meets requirements including total assets of at least 10 billion yuan ($1.6 billion), the China Insurance regulatory Commission said in a statement today on its website.

“Appropriately” loosening equity holdings in Chinese insurers can help companies attract strategic investors, enhance shareholder responsibilities and improve the efficiency of their corporate governance, the regulator said in a separate statement. The limit seeks to prevent any negative effect from over-concentration of equity stakes, according to the statement.

To increase its holding to more than 20 percent, the investor also needs to have been a shareholder in the insurer for at least three years, and its total long-term equity investments can’t exceed its net assets, the regulator said. The investor will be barred from selling the shares for three years after increasing its stake, according to the new rules.

A 2010 regulation had said qualified investors could be exempted from the current 20 percent cap if approved by the regulator, without specifying criteria or giving a new ceiling.

— With assistance by Dingmin Zhang

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