Ant Group’s woes a boon for established insurers
February 8 2021 by Raymond Barrett
With Ant Group soon to be subject to the same oversight as traditional banks, established insurers in China are likely breathing a sigh of relief that a would-be digital disrupter has been brought to heel.
Several media outlets reported this week that Ant Group, formerly known as Ant Financial, had “agreed” to restructure its credit, investment and insurance operations into a financial holding company to resolve an ongoing saga with the China Banking and Insurance and Regulatory Commission (CBIRC).
The regulator shot down the high-flying digital payment giant’s IPO in November over fears that a lightly regulated lender with access to a billion potential customers posed a systemic risk to the Chinese economy.
Jack Ma’s Alibaba and its subsidiary Ant Group had grown so quickly precisely because Beijing had exercised a light touch, but going forward the fintech giant will be subject to the same capital requirements as banks.
Ant has been building out its insurance business in recent years through its Alipay platform, mostly through the distribution of products offered by partner insurers. Ant is estimated to hold around 13% of the online insurance market and its Xiang Hu Bao mutual aid platform — which offers health protection to lower income people, especially in rural areas — is believed to have signed up at least a 100 million customers since it was launched in 2018.
The fact that the Chinese government became unwilling to tolerate a digital maverick moving into a traditionally conservative sector suggests that insurance start-ups who take a loose approach to risk management may also suffer a similar fate.
Speaking at the Asian Financial Forum this January, CBIRC chairman Guo Shuqing noted that the financial sector will be subject to “prudential regulation” in the years ahead. In addition, with the deadline for implementation of the new IFRS 17 regime fast approaching, the regulatory burden facing the insurance sector is only set to increase.
Therefore, well-capitalised insurers with extensive internal compliance and control systems may be less likely to face sudden competition from digital giants such as Tencent, Ant or smaller insurtechs.
This is likely a relief to more “old school” insurers who rely on antiquated relics such as human beings to distribute their products — insurers still employ hundreds of thousands of agents across China.
In what may be a prescient sign of the road ahead, Yin Ming, the head of Ant’s insurance unit, resigned last month after five years on the job amid uncertainties over the direction of the business.
His destination? The Beijing-based Sunshine Property and Casualty Insurance.
How very old school.
-
Opinion: Will generative AI be a game-changer when it comes to risk modelling?
- November 22
Algorithms can, in theory, be trained to create predictive models to analyse satellite imagery of cat-affected regions across Asia or forecast a typhoon’s trajectory as well as estimate potential damage and identify high-risk areas.
-
Opinion: Risks from rising ESG regulations looming threat for businesses
- November 1
The D&O market is playing a watching brief as sanctions and litigation around ESG breaches and non-compliance play out.
-
Opinion: Are we finally transitioning to a new era for energy risks?
- October 25
It’s important to mind the downsides when we think of the hard choices that need to be made on the road to net-zero.
-
Opinion: What has happened to the ESG agenda?
- October 3
While financial services jargon changes with each decade, time has shown that it is the policy that matters, not the presentation.
-
BHSI | Managing non-Asian exposure in long-tail lines
While US-exposed business can look attractive to Asian carriers, managing the volatility around the long-term results and the ability to model those losses are crucial, say BHSI’s Marc Breuil and Marcus Portbury.
-
Sedgwick | To Handle CAT Claims Well, Multi-Step Preparation is Key
When it comes to risk, it’s not a matter of “if” it’s a matter of “when” an event will occur.
-
HSBC Asset Management | Is it time to relook at Asian currency bonds?
With diversification and performance high on investors’ agendas, it seems a good time for global portfolios to revive allocations in Asian local currency bonds – including Hong Kong dollar (HKD) bonds.
-
PineBridge Investments | Why Asian insurers are exploring private credit and CLOs
The recent rollout of risk-based capital regimes across Asia calls for a closer alignment between insurers’ assets and liabilities. We explore potential ways to maintain a healthy investment yield and robust returns on regulatory capital.
