As to a foreign insurance company, if it wants to invest in Chinese insurance market or run business pertaining to insurance within China, it can (1) cooperate with a Chinese insurance company by executing strategic cooperation agreement, under which both parties agree to do extensive cooperation in the field of underwriting reinsurance, developing new insurance products, exclusively choosing the other as the potential partner, providing training and technique assistance to the Chinese insurance company;(2) establish a consultant company in China, through which the foreign insurance company can provide some counseling;(3) establish a foreign founded insurance company ( the foreigner’s shares shall exceed 25%) or purchase the equity of a Chinese insurance company ( the foreigner’s shares shall exceed 25%) or establish a branch of the foreign insurance company in China.
But according to CIRC’s regulation, the precondition for the foreign investors to process the previous option 3 is that at least one representative office has been established by the foreign insurance company and existing in China for at least two years. The following focus on the requirements by CIRC to establish representative office.
According to the Administrative Provision for the Representative Office of Foreign Insurance Institution, the A foreign insurance institution that applies for establishment of a representative office in China shall meet the following conditions:
(1) Have strong business performance;
(2) Have conducted insurance for at least 20 years;
(3)Have no record of any serious violation of laws or regulations in the 3 years prior to the application date;
(4) Other prudential conditions required by CIRC.
In the abovementioned clause, the reference to “having conducted insurance for at least 20 years” means that the foreign insurance institution shall have continuously operated its insurance business for at least 20 years. If the foreign insurance institution establishes a representative office in China through a subsidiary, the subsidiary itself must meet the 20-year operational requirement. If the foreign insurance institution establishes a representative office in China through its insurance group, the manner of calculation for the 20-year operational requirement is as follows (whichever of the following occurs earlier):(a) the date on which the group has started to conduct insurance business; or (b) the date on which any subsidiary in the group has started to conduct insurance business.
The reference to “other prudential conditions prescribed by CIRC” herein includes but is not limited to the following:
(a) the total assets of the Applicant shall exceed Two Billion Renminbi (RMB 2,000,000,000.00) or approximately Three Hundred Million US Dollars (US$300,000,000.00) by the end of the preceding year;
(b) it is necessary and feasible for the foreign insurance institution to establish a representative office in China;
(c) the proposed chief representative shall have knowledge of laws and regulations pertaining to insurance and management of the representative office;
(d) the country in which the foreign insurance institution is incorporated and exists has a stable political and economic situation and has a valid and strong financial regulation system;
(e) the applicant and its affiliate(s) shall have a sound corporate governance structure, have formulated rules for risk management, operated in compliance with relevant laws and regulations, and have potential for sustainable growth.
Items (a) and (e) are not applicable to non-profit foreign insurance institutions.