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Insurers Make Moving Money out of China Harder
Companies are clamping down further on a popular method: purchasing policies overseas
March 15, 2016 4:39 a.m. ET
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Insurance companies are clamping down harder on a popular method for mainland Chinese to move money out of the country: purchases of policies overseas.
During the past week, insurers including Prudential PLC, BOC Group Life Assurance Co. and China Life Overseas Co. have told their agents in Hong Kong that some online-payment channels are being closed, according to internal memos seen by The Wall Street Journal. These channels have made it easier for mainland customers to buy foreign-currency policies offshore.
Prudential and China Life didn’t respond to requests for comment. BOC Life said its action was driven by a notice from an online-payment provider.
Mainlanders’ purchases of overseas policies have soared recently as customers realized the savings-type products are a good way to park money offshore, and that some types of transactions sidestep the country’s capital controls. Chinese residents are limited to buying $50,000 in foreign currency a year, but credit-card purchases overseas were often overlooked—though insurers were supposed to cap the amount charged per transaction.
The yuan’s sharp depreciation starting last summer spurred individuals and companies to hold more savings in foreign currencies, contributing to record capital outflows.
As concern over outflows has mounted in China, authorities have pushed financial institutions to increase scrutiny and close off loopholes. In February, UnionPay, the dominant card issuer in China, told insurance companies overseas that it would strictly enforce the existing $5,000-per-transaction limit on overseas insurance purchases.
Insurance companies often allowed customers to pay much larger premiums with Chinese credit or debit cards, according to China’s foreign-exchange regulator and UnionPay. Insurance agents said they allowed clients to swipe their cards multiple times to purchase policies costing more than $5,000.
Insurers also often used online payment services from UnionPay and other third-party networks to let customers charge more than $5,000 in one transaction, according to insurance agents.
In an internal memo dated March 11 and seen by The Wall Street Journal, China Life told a Hong Kong-based business partner that clients could no longer use UnionPay’s online channel to buy insurance overseas. The memo cited a request by China’s central bank to UnionPay’s online division in Guangzhou.
The central bank didn’t respond to requests for comment. UnionPay said the $5,000 limit applies to both online and offline transactions and isn’t a new policy.
Prudential said in a memo to a broker dated March 11 that insurance buyers using UnionPay banking cards through online channels such as eCashier and myPrudential are subject to a daily cap of 30,000 yuan ($4,634). Prudential didn’t reply to a request for comment.
BOC Life said in a memo to a broker dated March 11 that “to cooperate with mainland regulators’ latest directive,” it was barring the use of Shanghai-based online-payment vendor All In Pay Network Service Co. by Chinese residents to pay for insurance policies overseas.
A BOC Life spokesman said All In Pay had suspended the service, adding that the insurer had been allowing transactions exceeding $5,000. All In Pay wasn't available for comment.
One Hong Kong-based insurance broker said agents expect that buying overseas policies will continue to grow harder for mainland Chinese, and that customers are rushing to purchase now before more loopholes are closed.
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