Insurance companies in China are backing out of their involvement with the country’s problem-plagued P2P lending sector.
P2P platforms in China have frequently sought to reassure investors by touting their performance guarantee insurance or debtor contingency insurance policies, which means that insurers will step in should debtors delay payments or default.
A recent report from Securities Daily indicates that at present P2P lending platforms cooperate with insurance companies in the provision 16 different types of insurance, including personal account fund safety insurance, personal accident insurance, collateral asset insurance and loan assessment liability insurance.
An increasing number of insurers in China are withdrawing from cooperative relationships with P2P lenders, however, in the wake of a regulatory crackdown on the sector since the start of 2018 and multiple platform upsets which have resulted in the payment of billions of yuan in compensation.
A report from Yingcan Consulting (盈灿咨询) indicates that as of the end of March 2017 55 P2P lending platforms had established cooperative relations with insurers, while 33 insurance companies were providing insurance services to P2P lenders.
By July 2018, however, the number of insurance companies co-operating with P2P platforms had fallen to little over a dozen.
Securities Daily reports that as of July leading online lenders in China touting their cooperative relationships with insurers included Lu P2P (陆金服), Yirendai (宜人贷), Xiaoying (小赢理财), 9F Group (玖富), Bangrong Hui (邦融汇), I&F Club (精融汇), Xiaoma Jinrong (小马金融), Jintou Xing(金投行) and Money Bees (蜜蜂有钱).
Many of these companies have since removed reference to cooperative relationships with insurance companies from their official websites, as insurers seek to dial back their involvement with the sector.
Insurance companies in China first made forays into P2P lending in 2014, with a large-scale increase in cooperative relations the following year.
The development prompted the erstwhile China Insurance Regulatory Commission (CIRC) to tighten its scrutiny of online lending platform insurance operations at the outset of 2016, stipulating that “online platforms cannot undertake misleading promotions involving methods such as expanding insurance liability.”
CIRC released the “Notice Concerning Strengthening Regulation of Online Platform Guarantee and Insurance Operations” (关于加强互联网平台保证保险业务管理的通知) in January 2016, which stated that “insurers cannot undertake cooperation with online platforms that engage in conduct which threatens national and public interests, including the provision of credit enhancement services, the establishment of capital pools and illegal fund-raising.”
The Notice also stated that “insurance companies should understand the capital flows, financial condition, credit records, payment sources, repayment capability and other matters of policyholders, and on choose high-quality customers with outstanding reputations for the prudent undertaking of business.”