Tian An P&C bond lapse highlights sector governance gaps: S&P

Tian An P&C failed to repay a $730m capital supplementary bond.

Tian An P&C Insurance’s bond default, the first in China’s insurance market, could hurt investor confidence and make it harder for smaller insurers to raise funds, according to S&P Global Ratings.

Tian An P&C failed to repay a $730m (RMB5.3b) capital supplementary bond after years of restructuring that followed its regulatory takeover in July 2020. 

The bond obligations were not transferred to the new entity, Shenergy P&C Insurance, leading to the default.

S&P Global Ratings said the event highlights the risks investors face and the importance of strong governance in China’s insurance sector. 

"We expect ripple effects for smaller insurers," said credit analyst Wenwen Chen.

The rating agency warned that small and midsize insurers may face tighter funding conditions as they try to strengthen their capital positions and prepare for upcoming accounting rule changes. 

Regulators are also expected to step up oversight to prevent similar governance failures.

As the industry adapts to slower economic growth, insurers are likely to focus more on profitability and improving internal controls, S&P added.