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)