CBIRC published its evaluation results for the corporate governance performance of ten Chinese insurance holding groups in 2020, as reported by financialnews.com.cn on February 4. Specifically, six of the ten groups, including PICC [1339:HK], China Reinsurance [1508:HK], China Taiping Insurance [0966:HK], China Pacific Insurance [2601:HK], Ping An Insurance [2318:HK], and Taikang Insurance, were rated B, while the rest four companies, including China Life Insurance [2628:HK], China United Insurance, Sunshine Insurance, and Huatai Insurance, only received a C rating. This means none of the companies managed to achieve an A rating.
China has made considerable efforts in the past few years to improve the quality and efficiency of its corporate governance in its financial sector. According to a policy document published in November 2019, CBIRC will evaluate Chinese banks and insurance companies regularly based on their organizational structure, equity structure, risk management, information disclosure mechanism, social responsibility, and other factors, to determine their corporate governance performance. These companies will be classified into five grades, from A to E, which corresponds to outstanding, good, qualified, weak, and bad performances.
This January, CBIRC issued its assessment of the corporate governance performance of 1,792 enterprises in 2020, including 1,605 commercial banks and 187 commercial insurance institutions. Among these companies, 1,400 companies secured the B or C rating, accounting for 78.12% of all companies. Meanwhile, 209 and 182 firms were rated D and E, respectively, representing 11.66% and 10.16% of the total. These companies were required to make immediate adjustments to their business and had to face restrictions in new business approval, business expansion, and else. According to CBIRC, the major weaknesses for these enterprises lay in their high levels of bureaucracy, inefficient risk control mechanism, and excessive control of major shareholders.
Based on these insights, CBIRC issued a new draft guideline this January to further improve corporate governance of Chinese banks and insurers. The guideline paid extra attention to the protection of shareholders’ rights and interests, especially those of small and medium shareholders. It also included party leadership as one of the indicators for good corporate governance. The guideline is open for public comments until March 1, 2021.