Insurance regulation in ChinaTen things to know

FINANCIAL INSTITUTIONSENERGYINFRASTRUCTURE, MINING AND COMMODITIESTRANSPORTTECHNOLOGY AND INNOVATIONPHARMACEUTICALS AND LIFE SCIENCES

1 The regulator

The China Insurance Regulatory Commission (CIRC) regulates insurance companies and intermediaries, including agents, brokers, loss adjustors and their business operations.

2 Subsidiary/Branch

Life and non-life insurer subsidiaries are permitted. Branches of non-life foreign insurers are permitted. Licences are issued on a ‘province by province’ basis.

3 FDI restrictions

Yes.

• Non-life – 100 per cent by foreign investor• Life – 50 per cent by foreign investor

Aninsurerbranchorsubsidiarywith≥25percentforeigninvestment is ‘foreign funded’ and different administrative regulations apply. E.g. a Representative Office is required for a2year‘seasoning’periodbeforeaforeignfundedinsurermay be set up.

4 Control approvals

≥5percent–priorapprovalofCIRCrequired.

< 5 per cent – notification to CIRC after transfer.

Directors and controllers must be approved by CIRC as ‘fit and proper’.

5 Minimum capital

Insurer (life or non-life):

• Nationwide:RMB200million• plus,perbranch:RMB20million(RMB500millionmax)

6 Risk based capital

No – solvency margin formulae based on premiums/claims applies.

The intention to implement a three-pillar structure has been announced. It will focus on a risk-based capital adequacy, risk management and information disclosure, in each case being consistent with international standards, but adapted for the Chinese insurance industry.

7 Group supervision

Yes. A group requires two or more insurance companies approved by CIRC and constitutes all member companies.

8 Policyholder protection

Yes, funded by industry levies.

In the event of insolvency or revocation of licence of a non-life insurer whose assets are insufficient to pay benefits, a non-life policyholder protection fund covers 100 per cent of losses up to RMB50,000 and thereafter, 90 per cent of losses for individual policyholders and 80 per cent of losses for corporate policyholders.

In the event of insolvency or revocation of licence of a life insurer, the policies are required to be transferred to a new insurer and the policyholder protection fund will make up the shortfall in supporting assets to 90 per cent of individual policyholder liabilities and 80 per cent of corporate policyholder liabilities.

9 Portfolio transfers

Yes. Consent of CIRC and individual policyholders is required for a voluntary portfolio transfer between contracting insurers. If a policyholder objects or fails to consent, CIRC cannot compel the transfer of a policy. In the event of insolvency or revocation of licence of a life insurer, CIRC can compel a portfolio transfer without policyholder consent.

10 Outsourcing

There is no unified law on outsourcing applicable to insurance operations. Individual laws address individual areas.Forexamplethereisanexpressprohibitiononoutsourcing the management of the security of information systems. Non-core back-office functions may be outsourced to qualified outsource providers (e.g. call centres, customer service and book-keeping).

Norton Rose Group Insurance regulation in China – ten things to know

Insurance regulation in China

Norton Rose Group Insurance regulation in China – ten things to know

Contacts

Norton Rose Group

Anna TippingPartnerNorton Rose (Asia) LLPTel +65 6309 5417 anna.tipping@nortonrose.com

Lynn YangPartnerNorton Rose LLPTel+862161377022lynn.yang@nortonrose.com

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