AIA Drops as China Tightens Restrictions on Insurance Sales

  • PBOC prohibits use of third-party payments for life insurance
  • Move comes after transaction limits placed on UnionPay cards

AIA Group Ltd. shares fell in Hong Kong after China tightened restrictions on the use of third-party payment providers to buy insurance products in the city.

Hong Kong-based AIA dropped as much as 2.4 percent Monday, the biggest intraday decline since Feb. 29, after Bloomberg reported Saturday the People’s Bank of China will ban the use of electronic payment services by mainland residents to purchase insurance and investment-related products, starting March 12. London-based Prudential Plc, which operates in 12 markets across Asia, rose 0.6 percent as of the midday trading break, after dropping as much as 0.7 percent earlier.

That compared with the 1.3 percent gain of Hong Kong’s benchmark Hang Seng Index.

Individuals can still use the electronic payment systems to buy insurance policies against personal accidents and for medical and transportation coverage, with a transaction and policy cap of 30,000 yuan ($4,600), according to notices sent by insurers to their agents that were seen by Bloomberg.

Company Confirmation

One notice issued by BOC Group Life Assurance Co. said the insurer was suspending any payments made by China UnionPay Co. cards through online payment provider All In Pay Network Services Co. A spokesman for the subsidiary of BOC Hong Kong Holdings Ltd. confirmed contents of the notice in an e-mailed statement Monday.

Calls and e-mails to All In Pay and Hong Kong’s insurance commissioner seeking comment outside of business hours weren’t immediately returned. The PBOC didn’t immediately respond to faxed questions Saturday outside office hours.

“The restrictions on the use of third-party payment providers, such as electronic payment (e-payment), have been in place for some time,” Sanford C. Bernstein analysts led by Linda Sun-Mattison wrote in a report Monday. “But the latest move is to ensure a stricter enforcement of the rules.”

Estimated Affect

China restricting the use of electronic payments will have less than 1 percent negative impact on the Hong Kong sales of AIA and Prudential in the near term as the average ticket size in the city is under the $4,600 limit, the analysts said in the report, citing Hong Kong regulatory data. Also, the two insurance companies have less exposure to super-size tickets, they added.

The latest move comes on top of transaction limits placed on the use of UnionPay cards last month as China stepped up administrative measures to slow capital outflows that Bloomberg Intelligence estimates reached $1 trillion last year. The tightening marked a reversal after years of easing that spurred global use of the yuan, a trend that turned on China when speculative bets against the currency offshore jumped.

Sales Volume

Chinese have been flocking to Hong Kong to buy insurance policies, which typically come with better service than in China and also offer them a way to skirt controls on how much capital they can move abroad. Purchases of insurance policies by mainland visitors in Hong Kong reached HK$21.1 billion ($2.7 billion) last year through September, following a 64 percent surge in 2014, according to the city’s industry regulator.

China’s State Administration of Foreign Exchange capped the purchases of insurance products overseas using UnionPay cards at $5,000 per transaction, people familiar with the matter told Bloomberg last month. Purchases through UnionPay cards had been exempt from capital controls that limit Chinese individuals to bringing out a maximum of $50,000 per year.

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