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Asian Regulatory Battles for Insurers

|Includes: AED, AGNGF, AXA-OLD, Allianz SE (ADR) (AZ), FORSY, ING, MET

The decision this week by the Australian competition regulator ACCC to block the National Australia Bank's bid for AXA APH is only the recent in a series of actions by Asian regulators that have thrown wrenches into the best-laid plans of insurers bent on expansion. At present, AXA's plans to consolidate its Asian operations are on hold, distracting senior management from getting on with business. It may be some small comfort to AXA CEO Henri Castries that others are equally stymied on other fronts.

Despite the fact that AIG included its $2.2 billion sale of the Taiwanese Nan Shan Life to Hong Kong's Primus Group was included in the insurer's 2009 results, the sale has still not been signed off upon by Taiwan's Investment Commission, as the regulator fears the commingling of mainland Chinese money in the murky acquiring consortium.

Meanwhile, in India, fireworks have been flying recently concerning the regulatory jurisdiction over Unit-Linked Insurance Products (ULIPs), which are variable-life like products which allow purchasers to invest in equities within insurance policies. Two weeks ago, on Friday afternoon, the Securities and Exchange Board of India (SEBI) -- the SEC-like capital markets regulator -- issued an order enjoining 14 of India's 23 private insurers to cease all sales of ULIPs until a process for their regulation by SEBI could be put in place. The next Monday, the Insurance Regulatory & Development Authority (IRDA), told insurers to ignore SEBI's injunction. The two regulators have since agreed to work together to arrive at a "legally binding" resolution to their territorial skirmish.

This is a non-trivial issue for Western insurers in India (whose ranks include New York Life, AIG, Swiss Re, Sun Life, Prudential Plc, AXA, Allianz, Met Life, Fortis, HSBC, Generali, and Aegon). ULIPs are serious business. An estimated 70-80% of new premiums collected by life insurers in recent years has flowed into these policies, representing a not insubstantial portion of total inflows into Indian capital markets. Meanwhile, legislation which would raise the amount of foreign direct investment in Indian insurers from 26% to 49% has been stalled in Parliament for over a year.

In short, much is up in the air for Western insurers seeking to expand their presence in Asia's rapidly growing markets.

Disclosure: Indices only