AIA, Prudential decline on China restrictions on insurance sales

[HONG KONG] AIA Group Ltd and Prudential Plc shares declined in Hong Kong after China tightening restrictions on the use of third-party payment providers to buy insurance products in the city.

Hong Kong-based AIA fell as much as 2.4 per cent Monday, the biggest intraday decline since Feb 29, after Bloomberg reported Saturday the People's Bank of China will prohibit the use of electronic payment services by mainland individuals for any purchases of life insurance and investment-related products, starting March 12. Prudential, which operates in 12 markets across Asia, dropped as much as 0.7 per cent.

That compared with the 0.9 per cent gain of Hong Kong's benchmark Hang Seng Index as of 10:03 am local time.

Individuals can still use the electronic payment systems to purchase insurance policies against personal accidents and for medical and transportation coverage, with a transaction and policy cap of 30,000 yuan (S$6,316), according to notices sent by insurers to their agents that were seen by Bloomberg.

One notice issued by BOC Group Life Assurance Co said the insurer was suspending any payments made by China UnionPay Co cards through online payment provider All In Pay Network Services Co.

Calls and e-mails to BOC Group, All In Pay and Hong Kong's insurance commissioner seeking comment outside of business hours weren't immediately returned. The PBOC didn't immediately respond to faxed questions Saturday outside office hours.

UnionPay curbs

The latest move comes on top of transaction limits placed on the use of UnionPay cards last month as China stepped up administrative measures to slow capital outflows that Bloomberg Intelligence estimates reached US$1 trillion last year. The tightening marked a reversal after years of easing that spurred global use of the yuan, a trend that turned on China when speculative bets against the currency offshore jumped.

Chinese people have been flocking to Hong Kong to buy insurance policies, which typically come with better service than on the mainland and also offer them a way to skirt controls on how much capital they can move abroad. Purchases of insurance policies by mainland visitors in Hong Kong reached HK$21.1 billion (S$3.71 billion) last year through September, following a 64 per cent surge in 2014, according to the city's industry regulator.

China's State Administration of Foreign Exchange capped the purchases of insurance products overseas using UnionPay cards at US$5,000 per transaction, people familiar with the matter told Bloomberg last month. Purchases through UnionPay cards had been exempt from capital controls that limit Chinese individuals to bringing out a maximum of US$50,000 per year.

BLOOMBERG