China has rejected an application by American International Group Inc to turn its Shanghai life insurance branch into a wholly owned subsidiary, the top insurance regulator said yesterday.

 

AIG's American International Assurance unit has applied to transform its Shanghai branch into a subsidiary, which "actually" equals setting up a wholly owned life insurer and is against Chinese regulations, the China Insurance Regulatory Commission said yesterday on its Website.

 

The attempt by the world's biggest insurer contravenes China's World Trade Organization agreements - overseas life insurers can only set up joint-venture life insurance business in China and can own no more than 50 percent.

 

The plan has "legal barriers" and won't be approved, the regulator said.

 

AIA was not available for immediate comment yesterday.

 

AIA is one of the first overseas life insurers to tap the Chinese market. Its premiums topped 7.02 billion yuan (US$949 million) at the end of October as the biggest overseas life insurer in China.

 

China allows overseas insurers to set up a wholly owned subsidiary only in the non-life insurance area.

 

AIU Insurance Co, the non-life affiliate of AIG, won approval to grant the branch subsidiary status earlier this year.

 

The Shanghai-based subsidiary, named AIG General Insurance Co China Ltd, opened operations in late October. AIU branches in Shanghai, Guangdong and Shenzhen, which formerly directly reported to its US headquarters, are now consolidated into AIG General.

 

(Shanghai Daily December 11, 2007)