American International Group has had to abandon its plans to apply for an expanded license to sell group insurance in mainland China because some of its agents in Hong Kong violated Chinese rules.
AIG, which holds a major presence in China, has dropped its plan to extend its portfolio of insurance products in the Far East country because company representatives broke Chinese laws by selling insurance to mainland Chinese residents from Hong Kong.
Despite returning to Chinese ownership in 1997 when the UK handed it back, Hong Kong has remained distinct from the rest of China in a number of ways, including how its financial services are regulated.
It is currently illegal under Chinese law for Hong Kong-based insurance providers to sell policies to mainland residents. In order to serve the majority of China’s population, foreign companies must go through a rigorous regulatory process to acquire licenses to operate.
In a filing with the SEC, AIG revealed that it dropped its group insurance plans in March because it had to resolve regulatory issues. The new development is an unfortunately timed problem for AIG in the context of its considerable difficulties back in the US and is the first significant blight to what has been an extremely successful infiltration of the Chinese insurance market.