M&A OF INSURANCE COMPANIES: APPROACH SELECTION AND MAJOR ISSUES
On 11 April 2018, the Governor of the People’s Bank of China, Yi Gang, announced at the Boao Forum for Asia (“BFA”) that the 50% foreign ownership restriction in the life insurance sector is to be lifted to 51% in the first half of 2018. In addition, it was noted that complete liberalization of the life insurance sector (i.e. no foreign ownership restriction) can be expected in three years’ time. On 27 April 2018, the China Banking and Insurance Regulatory Commission (“CBIRC”) issued an announcement on accelerating the implementation of measures regarding opening up the markets of banking and insurance. The CBIRC stated in the announcement that the liberalization of the foreign ownership in the life insurance sector as announced at the BFA would be implemented as soon as possible. Given the scarcity of insurance licenses and the unique attributes of the insurance business, mergers and acquisitions (“M&A”) of insurance companies have always been chased after by the capital. For the specific M&A rules of insurance companies, in addition to the regulatory requirements for equity-related activities, the CBIRC issued the Measures for the Administration of the Equities of Insurance Companies (Order No. 5  of the CIRC) on 7 March 2018, which provides further guidance and stipulates additional requirements for M&A transactions for insurance companies. Based on our experience in insurance companies’ M&A transactions and in reference to the Equity Measures, this article outlined the M&A transaction options and common issues for M&A transactions involving insurance companies.