China has approved the operation of Allianz (China) Insurance Holding Co Ltd, the first fully foreign-owned insurance holding company in the country, marking a major step toward the liberalization of domestic financial markets.
Based in Shanghai, the company announced on Thursday it received authorization from the China Banking and Insurance Regulatory Commission to begin operations, which the company said will enhance its strategic and financial flexibility to capture business opportunities, further increase its investment and drive long-term market success.
"The regulatory approval for the holding company is an important landmark for our business and puts us in priority position to maximize on the opening up of the Chinese economy," said Sergio Balbinot, the company's chairman.
The approval follows a series of measures announced by the government to further open up the country's financial markets and encourage investment by foreign financial institutions.
The State Council's Financial Stability and Development Committee announced in July that China will remove foreign ownership caps for futures companies, securities firms and fund houses by 2020, a year earlier than scheduled.
The acceleration of the opening up of Chinese financial markets will bring multiple benefits to foreign investors and the financial sector, analysts said.
Wang Guojun, a finance professor at the University of International Business and Economics, said, "By setting up a fully foreign-owned insurance holding company in China, foreign insurers can explore more business opportunities in research, investment, product design and customer service and compete with domestic insurance groups."
Solmaz Altin, chief executive officer of the company, said, "With the new holding structure in place, we are able to better serve an expanding middle class with our range of financial solutions."
So far, a total of 12 domestic insurance groups account for more than 70 percent of premium income in China's insurance sector.
"We need more market participants in different types of ownership. A larger number of fully foreign-owned insurance holding companies and joint ventures will encourage learning from one another through competition.
"Domestic insurers can learn from their foreign counterparts in terms of actuarial methods, risk management, and the establishment of firewalls between business segments within a group," Wang said.
Zhou Jin, a PwC China financial services consulting partner, said: "According to our observations, many financial joint ventures, in which foreign investors hold less than 50 percent, have some flaws in corporate governance. If stakeholders disagree with each other in terms of strategy or operational objectives, it will cause a swing of strategies for the joint venture and the senior management will be at a loss for what to do."
He added that, "Under current policies, however, foreign stakeholders can have a controlling interest in a financial institution and set their strategic direction, so they will be more willing to increase their investments."