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(Bloomberg Gadfly) — Is Beijing about to find out what it’s like to be held hostage by a monster it helped create?

For the last several years, China has allowed smaller insurance companies to flourish in the interests of creating competition for industry heavyweights such as China Life Insurance Co. and Ping An Insurance Co. Authorities wanted to shake-up the population’s save at all costs mentality and at the same time, encourage investment in areas other than the nation’s oftentimes volatile stock market.

(Related: United Arab Emirates Looks Like a Hot Life Market)

Sales of universal life products — short-term, high-yielding investments that include a small insurance component — boomed, with newer market entrants like Anbang Insurance Group Co., Huaxia Life Insurance Co. and Foresea Life Insurance Co. the main issuers. To fulfill the heady returns promised, those firms embarked on highly leveraged acquisitions, from hotels in New York to insurance assets in South Korea and Belgium.

Debt levels spiraled and before long, Beijing started to take steps to rectify the situation. In February, the China Insurance Regulatory Commission banned the chairman of Foresea Life from the industry for a decade, two months after it barred the company from selling all universal life products, indefinitely. It then prohibited Foresea Life from applying to sell new policies of any kind for three months.

Now, Foresea Life is warning of mass defaults and social unrest unless the nation’s insurance regulator lifts that new-policy sale ban, according to a letter seen by the Financial Times. The unit of conglomerate Baoneng Group said it expects 60 billion yuan ($8.7 billion) in redemptions this year and might not be able to meet payouts unless it can sell fresh policies.

Foresea Life said in a statement on its website that cash flow is stable and business relations with customers are good. It also said its debt-coverage ratios are higher than what the regulator requires.

It’s difficult to see how that’s true. According to Bloomberg Intelligence analyst Steven Lam, Foresea Life’s market share slid to 0.9% in the first quarter, based on premiums and investment funds received, from about 2.9% as of March 31, 2016.

And bondholders aren’t buying it either:

Whatever the case, Foresea Life’s now-public complaint shines a spotlight on how China’s tamping down on high-risk insurance products could hurt Beijing’s much-prized focus on social stability above all else. If Anbang and Huaxia Life add their voices to the fray, Beijing may discover the real cost of its anti-leverage campaign.

— Read FGL Scraps $1.6 Billion Anbang Deal, Says Others Are Interested on ThinkAdvisor.

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