Insurance: Wake up, regulators!
(China Daily)Updated: 2007-05-30 10:26
The China Insurance Regulatory Commission (CIRC) will tap its insurance protection fund to buy a stake in New China Life, China's fourth largest insurance company, to fill the gap created by the company's embezzlement scandal.
| |||
CIRC will reportedly pay 1.6 billion yuan ($209 million) for 22.5 percent of the problem-ridden New China Life Insurance Co, which has 6.5 percent of the nation's total life insurance market share.
We hope the move will help rehabilitate the company and put it in on the right track in China's fast-growing life insurance market.
The lessons from the company's internal problems, however, should not be forgotten. They should be used in building better corporate governance for the company.
Established in 1996, the shareholding company has been under the de facto control of Guan Guoliang, its chairman, who allegedly embezzled 13 billion yuan ($1.7 billion).
Despite the company's strategic investment from foreign investors and despite its board, Guan retained a dominant role in corporate affairs.
Guan's series of investment decisions bypassed the board to benefit other companies he controlled.
For a financial institution of such magnitude, one-man control spells danger. If publicly traded (its listing plan was once nearly approved), the company would have endangered the interests of its shareholders.
Regulators should reflect on their supervisory role before a crisis erupts. Supervision of a financial institution should be stricter than that of other companies.
Guan reportedly circumvented the board for years in making investment decisions and his conflict with other major shareholders was no secret.
Regulators should have paid attention to the evidence of one-man control before the one man risked destroying the company.
(For more biz stories, please visit Industry Updates)