Due to its dramatically quick development and tremendous prospects, the Chinese insurance market has attracted a huge flow of foreign investment, most of which focuses within insurance companies.

According to the Chinese commitment to WTO, the insurance industry is the first financial field to be opened to foreign investment. At the present time, as far as the establishment of a foreign-funded insurance company is concerned, some foreign investors are still puzzled by conundrums.
 

In the regulation of administration of foreign-funded insurance company, Article 8 stipulates the establishment requirements: "A foreign insurance company that applies for establishing a foreign-funded insurance company shall meet the following conditions:
 

1. It shall have been engaged in the insurance business for more than 30 years;

2. It shall be more than two years since a representative office was established within the territory of China;

3. The total assets at the end of the year prior to the application for establishment shall be no less than 5 billion US dollars;

4. The country or region where the foreign insurance company is situated shall have sound systems for the regulation of insurance and the foreign insurance company shall have already been under the effective regulation of the relevant authority of the country or region;

5. It shall satisfy the solvency standard of the country or region;

6. It shall obtain the approval of relevant authorities of the country or region for the establishment.

7. It shall satisfy other conditions discreetness as provided by the CIRC."

Besides the above-mentioned requirements, foreign-funded insurance companies should be subject to the same requirement as the domestic-funded company, including registered capital, human resource, etc.

However, if investors fulfill such basic requirements, they are not fully guaranteed to get insurance licenses, but be ensured to step into the waiting list of CIRC.

Meanwhile, where a foreign insurance company establishes a joint equity insurance company with a Chinese partner for engaging in the life insurance business, the foreign share shall not exceed 50%.

Taking such regulations into consideration, many foreign investors want to establish a domestic-funded company. According to administrative provision on insurance company, if the oversea shareholders’ shares in an insurance company do not exceed 25%, this company would be treated as a domestic-funded insurance company.

Nevertheless, most foreign investors want to take advantage of their business experience, actuarial technology and customer resources and get majority control of the company. In China, there is a difference between Limited Liability Company and Joint Stock Limited Company. In the structure of a limited liability company, shareholders can decide the vote way by themselves, not basing on share number, and it is not the case in a joint stock limited company. Unfortunately, an insurance company must be a joint stock limited company in China.

Finally, the question of how to expedite foreign investment within insurance companies is still a conundrum faced by Chinese lawyers.