Anbang Insurance Chairman Wu Xiaohui can’t perform his duty “for personal reasons”, and has delegated his authority to other executives, the company said, after it was reported that Wu was taken away for investigation. The statement from Anbang added that the group’s business operations remain normal. The financial magazine Caijing reported that China Insurance Regulatory Commission (CIRC) officials had met with the company’s executives and informed them that Wu had been taken away, without giving detailed reasons. The Caijing story was deleted hours after it was published. Xiang Junbo, Chairman of the CIRC, was sacked and also put under investigation two months ago. Wu Xiaohui’s arrest or detention “could raise questions about Anbang’s ability to remain a major player in outbound mergers and acquisitions,” said Brock Silvers, Managing Director of Kaiyuan Capital, a Shanghai-based financial advisory firm.

Analysts are worried that Wu’s disappearance could lead to a liquidity crunch that infects the wider industry. Wu’s case could undermine a widely-held public perception of Anbang as one of China’s most resourceful and powerful companies, according to Guo Zhenhua, Dean of the Insurance Department at the Shanghai University of International Business and Economics. “The most worrying issue would be an intensive cancellation of insurance policies which would severely weigh on Anbang’s cash flow,” he said. The company has relied heavily on selling high-risk, short-term insurance policies to beef up its fund for takeover bids. Anbang Life Insurance, the flagship of Anbang Insurance Group, reported a solvency ratio of 129% by the end of the first quarter, a sharp drop from 290% in the same period of 2016, but still above the 100% regulatory red line. Anbang has been at the forefront of developing and promoting short-term, high-yield insurance policies, known as universal life insurance and similar to wealth management products, which in turn has fueled a spending spree by the firm both in China and abroad in the past few years. Publicly available information shows Anbang holds major stakes (above 5%) in eight firms listed in Shanghai, Shenzhen and Hong Kong.

The China Insurance Regulatory Commission (CIRC) has been taking stringent measures to curb the risky, short-term products pioneered by Anbang and favored by insurers since the high-profile dismissal of its former Chairman Xiang Junbo in April. Xiang himself had been an active promoter of the universal life products. On May 5, Anbang Life was prohibited from issuing new products for a period of three months, after the CIRC found one of its annuity products had “violated the regulator’s rules and disturbed market order”. Anbang held a 3.4% and 5.3% share of the national insurance premium market in 2015 and 2016, respectively. Its market share of all investment-type products was much higher at 6.4% and 19.4% in those two years. The company’s total assets are currently worth about CNY1.97 trillion. Anbang, a little known insurer when it was founded in the Chinese capital in 2004, has become one of the country’s largest conglomerates in a little more than a decade. In 2014, Anbang acquired the Belgian insurer FIDEA Assurances, and bought the Waldorf Astoria hotel in New York.