Authored by Dr. Zhan Hao and Dr. Annie Xue

clevel play ground, optimizing industry structure, promoting competitiveness, and enriching the risk management tool kit of the insurance institutes”, quoting a statement of CIRC posted on its website. [1]

Promotion of Competition

CIRC’s partially relaxed mergers and acquisition rules in the insurance sector are expected to help facilitate market entry and expand the footprint of private capital, including the domestic and China-based foreign-funded insurance firms.

To begin with, financing sources are broadened. According to Article 30 of the Measures, preconditioned on ex ante approval by CIRC, investors in the merger and acquisition activities of insurance companies may raise funds from merger and acquisition loans or by other means, provided that the amount of the said loans does not exceed 50 percent of the total monetary consideration. Previously, CIRC did not allow the shareholders of insurers to take advantage of banking loan or other financial leverages for merger and acquisition.

Secondly, the requirements of shareholders are moderately relaxed. Article 2 (4) of the Notice of the China Insurance Regulatory Commission on Issues concerning Article 4 of the Measures for the Administration of Equity in Insurance Companies (“中国保监会关于<保险公司股权管理办法>第四条有关问题的通知”) [2] stipulates that:

A shareholder of an insurance company who contributes over 20% (exclusive) of the total capital of the insurance company or holds more than 20% (exclusive) of its shares shall meet the following requirements, in addition to the requirements on major shareholders as prescribed under Article 15 of the Measures for the Administration of Equity in Insurance Companies:

(4) It shall have been investing in the insurance company for three years or longer…

Article 29 of the Measures exempts the shareholders from the Article 2 (4) requirement on the basis of CIRC’s prior approval.

Thirdly, CIRC will allow insurers to buy stakes in more than one peer that competes in the same market segment. Article 21 of the Measures provides that “upon approval by CIRC, an acquirer is allowed to control two insurance companies engaging in the same type of business after the completion of acquisition.” This provision can be expected to encourage more and more merger and acquisition in China’s insurance market, especially those launched by investors with ample capital and huge ambition.

Fourthly, the Measure can be expected to benefit both large and small-sized insurance firms.

Despite that the insurance giants have occupied a majority of the Chinese market, the rest of the market is still highly cellular. For instance, in 2013 the five largest life insurance companies accounted for 69.5 percent of the market, and the five largest casualties and property insurance companies’ market shares reached 74.3 percent. However, the rest of the market is divided by nearly 100 insurers, and most of them have less than 1 percent of market shares.

The Measures will allow the combination of insurance firms competing in the same segment of the market and thereby gaining market strength to combat larger competitors.

Meanwhile, with the restructuring of the insurance sector facilitated by the Measures, the thrusting-out of smaller firms will mitigate the pressure of price war initiated by the mavericks upon the large market incumbents.


While relaxing the merger and acquisition activities, CIRC maintains regulation with a focus on mitigating information asymmetry.

Information disclosure and independent role of intermediary service agencies are strengthened and highlighted.

Article 23 of the Measures provides that

“Where the parties to the M&A activities of insurance companies fail to perform the obligations of reporting, announcement or notification as required, or are found to have false records, misleading statements or material omissions in reports, announcements and other documents, the CIRC shall be entitled to order the said parties to make correction, and arrange regulatory talks with or issue regulatory letters to the parties concerned, order the parties concerned to suspend or stop the M&A activities, and take other regulatory measures.”

Article 24 of the Measures reads that

“Where the parties to the M&A activities of insurance companies fail to truthfully report to the CIRC information on the actual controller and the relationship of affiliation, or fall under the circumstances of holding equity on behalf of others, which has a material impact on the M&A activities, the CIRC may restrict the shareholders’ rights of the parties concerned, order the same to transfer equity, and take other measures.”

Article 25 of the Measures reads that

“…Where a professional service intermediary fails to truthfully reflect the compliance of the M&A procedures of insurance companies and the asset conditions of the insurance companies involved, the CIRC may set up credit files, and restrict the professional service intermediary from participating in the M&A of insurance companies within three years.”

Article 26 of the Measures stipulates that

During the M&A process of insurance companies, CIRC may communicate and coordinate with the Ministry of Commerce, the People’s Bank of China, the China Banking Regulatory Commission, the China Securities Regulatory Commission as well as administrations for industry and commerce and tax authorities to verify the completeness, truthfulness and accuracy of the information submitted.”

Transitional period and lockup period are set up to ensure sustainable operation of the acquired insurance company.

Article 11 of the Measures reads that

The period from the conclusion of an equity transfer agreement, capital contribution agreement or share subscription agreement to the completion of the ownership transfer of relevant equity or shares shall be the acquisition transition period. During the acquisition transition period, except for the purpose of rescuing the target insurance company facing serious financial difficulties, the acquirer concerned shall not propose to re-elect the board of directors of the target insurance company, and the target insurance company shall not engage in investment, and purchase and sale of assets that have a material impact, or engage in transactions with the acquirer and its affiliated parties.

Article 12 provides that   

“Except under special circumstances such as risk disposal or transfer between different parties under the control of the same controller, an acquirer shall undertake, in writing, not to transfer its holdings of the equity or shares in the target insurance company within three years from the completion of the acquisition.”

Punishment mechanism is provided for to deter and penalize false statement and holding equity on behalf of others.

As mentioned above, according to Article 23, false records, misleading statements or material omissions in reports may lead to corrective measures, regulatory talks, suspension or cease of merger and acquisition activities, and other regulatory measures.

As per Article 24, holding equity on behalf of others is subject to CIRC’s restriction on the shareholders’ rights, order to transfer equity, and other measures.

Concentration filing is expressly provided for the first time. The Measures mark the first time that a CIRC rule explicitly requires the regulated to make concentration filing where it is necessary. Article 4 reads that

Where industry entry, application for the concentration of business operators, transfer of State-owned equity and other relevant matters are involved in the M&A of insurance companies, as a result of which the approval from relevant departments of the State shall be obtained, the M&A activities shall be carried out only after the required approvals have been obtained.”


[1] See the statement in Chinese at

[2] Chinese version is available at