China:6 in 10 insurance holding groups graded 'B' for corporate governance

The CBIRC has released the results of its first ever assessment of the corporate governance of insurance holding groups in the country. None of the groups managed to obtain an 'A' score which is equivalent to an 'outstanding' grading.

A total of 10 insurance groups were evaluated, of which six received a rating of 'B' (good). The remaining four obtained a 'C' grade (qualified), indicating that there were some shortcomings in their corporate governance. The four were China Life Insurance (Group), China United Insurance Group, Sunshine Insurance Group and Huatai Insurance Group.

The highest available mark in the evaluation system is 100 points. Those who score from 90 to 100 marks receive an 'A' grade; those with 80 points to 90 points are rated 'B', those with 70 points to 80 points are rated 'C' and those with less than 70 points are graded 'D'.

The CBIRC attributed the fact that none of the insurance groups scored 'A' due to several factors, including major shareholders’ excessive interference, weak internal risk controls, and lack of an effective long-term incentive and restraint mechanism.

The regulator says that the insurance groups have to deal with five problems:

• some groups are highly bureaucratic and their market-oriented mechanism is not perfect;
• the management of shareholders' rights falls short, shareholders' disputes exist, and constraints on shareholder behaviour are urgently needed;
• the core role of the board of directors has not been fully utilised, and there are still problems such as excessive intervention by major shareholders;
• the management of companies within the group falls short; there is a lack of a comprehensive risk compliance management system;
• an effective long-term incentive and deterrence mechanism has not been established.

Source: Asia insurance review