INSURANCE mergers and acquisitions rarely raise red flags with U.S. national security watchdogs. China’s Fosun International Ltd. took that history to heart last year when it paid US$1.84 billion for the remaining 80 percent stake of U.S. property and casualty insurer Ironshore Inc. that it did not already own.

    But in December 2015, one month after Fosun completed the acquisition, it was approached by officials at the Committee on Foreign Investment in the United States (CFIUS), a government panel that scrutinizes deals over national security concerns, according to sources.

    The CFIUS was concerned about how Fosun would operate Ironshore’s Wright & Co., a provider of professional liability coverage to U.S. government employees such as law enforcement personnel and national security officials, including the Central Intelligence Agency, according to these sources.

    The CFIUS operates a voluntary filing system for companies engaged in a deal. Such an instance of the panel approaching companies after they complete a deal is rare.

    But the recent U.S. scrutiny of Fosun — which did not seek CFIUS nod for the Ironshore deal — is just one example of a new impetus by the CFIUS to target what it refers to as “non-notified transactions” — or deals that did not seek CFIUS nod in advance.

    In the last twelve months, the CFIUS has stepped up its pursuit of these non-filers over concerns that some deals were falling through the cracks, according to sources with direct knowledge of the panel’s inner workings. This previously unreported push by the CFIUS has the potential to delay some deals and raises the risk of them being thwarted altogether.

    While Wright accounted for a tiny fraction of Ironshore’s business, the inquiry has forced Fosun to delay its initial public offering of Ironshore, which has been registered with the U.S. Securities and Exchange Commission since June, until the CFIUS clears the original acquisition. Fosun will now likely miss a window for IPOs due to the expected market volatility around the Nov. 8 U.S. presidential election, according to the sources.

    Chinese companies have been treated with suspicion by the CFIUS because of the ties many of them have to the Chinese Government, reflecting the complicated diplomatic and commercial ties between China and the United States.

    This has not stopped Premier Li Keqiang’s “going out” policy, which encourages Chinese companies to buy foreign trophy assets. The push — aided by the CFIUS’s history of rarely shooting down deals altogether — contributed to Chinese merger and acquisition activity in the United States reaching a record high of US$32 billion so far this year.

    To be sure, the CFIUS has approached companies in the past as well, and does not limit its review to only Chinese deals. In 2010, the CFIUS contacted Russian Internet company CMail.ru and AOL Inc. over the latter’s US$188 million divestment of messaging service ICQ to Cmail.ru, which had already been completed. The CFIUS review in that instance did not require the deal to be unraveled.

    On rare occasions, the panel has also vetoed deals, such as the US$3.3 billion sale of Koninklijke Philips NV’s lighting business to a consortium of Chinese investors, which it blocked last January.

    But Ironshore and similar cases this year show that the U.S. watchdog is flexing its muscles in a more subtle, albeit disruptive, fashion.

    “Companies may assume that there is no chance that the CFIUS would have an interest in their transaction, but that runs the risk of possible miscalculation,” said Eric Dinallo, a partner at law firm Debevoise & Plimpton LLP. (SD-Agencies)