The State Administration of Foreign Exchange (SAFE) announced yesterday that it had found forex business irregularities at five insurance companies during a recent inspection, but that overall compliance was good.
SAFE conducted compliance inspections at five insurance companies on their forex business in 2003. SAFE said the inspections were conducted to analyze "new situations and new problems" in the sector as well as to supervise operations.
The five insurers' compliance performance was "good overall, but practices contrary to forex management were found," it said.
Some insurers wrote forex-denominated policies for unqualified clients or uninsurable risks, the administration said. It also found problems of currency mismatch between premiums collected and compensation paid. Some insurers were found accepting forex cash premiums, which is not allowed.
Forex business at Chinese insurers has been growing in recent years as market liberalization continues, prompting regulators to issue rules late in 2002 to improve control of the sector.
With insurers' forex holdings growing fast, Chinese authorities have been considering allowing them to invest in overseas capital markets in order to improve yields.
Chinese insurance companies have long confronted the problem of limited investment channels. The problem is more serious in forex business, given the nation's tight controls.
(China Daily August 13, 2004)
