Authored by Dr. Zhan Hao ( and Wu Shanshan from AnJie Law Firm

On August 14, 2014, State Council promulgated Several Guiding Opinions Regarding Accelerating the Development of Modern Insurance Services (“New Guideline”) based on the original version of Guiding Opinions [1] issued by State Council in June 15 2006. The New Guideline is deemed as the essential impetus to PRC insurance industry.


Compared with the original Guideline, the New Guideline has two significant traits. On one hand, it specifically defines the orientation of insurance industry and analyzes its development route. On the other hand, it expressly emphasizes the significance of innovation and reform in the development of insurance industry. It releases good signals for the development of insurance industry in China.

1. Clearly Define the Orientation of Insurance Industry and Analyze its Development Route

The New Guideline defines the orientation of insurance industry from the perspectives of national governance system and modernization of governance capacity. The original Guideline merely underlined the significance to reform insurance industry and set forth an overall objective therein. However, it did not point out the particular and detailed steps to realize the overall objective. The words and phrases in the original Guideline clearly indicate that the development of insurance industry is not satisfactory at that time. Therefore, the primary matter is to set up the correct prospect pertaining to insurance industry.

After nine years, PRC insurance industry has accomplished great achievements. The size and scale of insurance funds soared in recent years. Now insurance industry is regarded as the indispensible component of national economy. The New Guideline states that insurance industry acts as the basic tool for government, enterprises and national residents to manage risks and wealth. It paves an important way for national government to improve public service and strengthen social management. Conclusively, PRC government thinks that insurance industry takes on great responsibilities to satisfy various and uninterrupted needs of insurance services. Insurance industry serves as an economic “roll booster” and social “stabilizer”. In this regard, PRC government sets the specific goal for insurance industry: insurance penetration (premium/GDP) will reach 5%, and insurance density (premium/total population) will reach 3,500 Yuan per person by 2020. Pursuant to the data published by competent authorities, insurance penetration in 2013 was 3.02%, and insurance density in 2013 was 1,265.67 Yuan per person.

2. Key Development Areas Outlined in the New Guideline

(1) Build an Insurance Network to Secure People’s Well-beings and Consummate a Multi-level Social Security System

In the New Guideline, PRC government estimates that the commercial insurance will be established as the important pillar of social security system. Although commercial insurance merely acts as the supplement to basic social welfare system and basic medical insurance system, the New Guideline encourages insurance enterprises to gradually provide insurance for individuals and families, to provide endowment insurances and health insurances for enterprises, and to actively participate in the marketization of social insurances. It encourages insurance industry to innovate the endowment insurance in order to satisfy multi-level needs. Also, it stimulates insurance enterprises to develop various commercial health insurance products, to furnish supporting health administration, and to take part in the reform of medical services. Moreover, governments at all levels shall consider the needs of elder care industry and health service industry in making master planning of land use.

Those statements show that PRC government has come to realize the importance and function of the commercial insurance.

(2) Utilize Liability Insurance to Resolve Disputes

The New Guideline stresses the development pattern of liability insurance with government guidance, market operation and legal protection.

In developing liability insurance, insurance enterprises shall pay more attention to areas closely related with public interests, for instance environment contamination, food security, medical liability, society security, and campus security. Also, it upholds insurance enterprises to launch pilot projects for compulsory liability insurance.

Currently, the liability insurance is the advantage for the foreign insurer during the competition with their domestic counterparts.

(3) Bring Insurance into Disaster and Accident Prevention and Relief System, and Establish Catastrophe Insurance Mechanism

The New Guideline stipulates that it is essential to teach enterprises and residents to manage risks with market approaches. It is necessary to fully exert the incentive and restrictive functions of the insurance premium rate leverage, to reinforce before-the-event risk prevention, to reduce disasters and accidents, and to promote safe production and emergency response management. Also, it upholds the establishments of catastrophe insurance fund and catastrophe reinsurance mechanism to diversify catastrophe risks.

Generally speaking, PRC is short of catastrophe insurance and reinsurance product, and CAT bond is hot issue now in Chinese market.

(4) Innovate the Ways to Utilize Insurance Funds and Promote the Harmonious Development of Insurance Market and Capital Market

Under the premise to guarantee the safety and profitability of insurance funds, it stimulates insurance industry to innovate the ways to utilize insurance funds, and to improve the efficiency to deploy insurance funds. It encourages insurance funds to support key state-owned projects and projects for people’s well-being such as major infrastructure, shanty area renovation and urbanization, through debt investment schemes and equity investment schemes, which is a kind of loan issued by insurance asset management companies in China. It encourages insurance enterprises to provide capital for Hi-tech enterprises, small and micro enterprises and strategic emerging industries in the form of equity investment, debt investment, funds, and asset support plans, which is similar to ABS.

Moreover, it promotes the harmonious development of insurance market and capital market. Insurance enterprises, as institutional investors, vigorously contribute to the stable and enduring development of stock market and bond market.

(5)Enhance the Development of Export Credit Insurance to Support Enterprises Going Abroad

The New Guideline stimulates the enhancement of export credit insurance to support the development of independent brands, independent intellectual properties and strategic emerging industries, and it advocates the simplification of approval procedures.

(6) Promote the Market-oriented Reform of Premium Rates

In August 1 2013, China Insurance Regulatory Commission (“CIRC”) promulgated a Notice on Issues Concerning the Policy Reform of Premium Rates of Ordinary Personal Insurance which indicates the start of market-oriented reform of premium rate. The New Guideline intends to comprehensively deepen the reform of premium rates of personal insurance, and steadily carry out the reform of premium rates of automobile insurance.

(7) Insurance Company Globalization

The New Guideline encourages Chinese insurance enterprises to explore oversea insurance market in diversified forms and through various channels in order to underwrite risks for Chinese enterprises abroad. It also upholds Chinese insurance enterprises to raise capital from international capital market, and vigorously expand the export of insurance services.

(8) Strengthen and Improve the Supervision of Competent Authorities, as well as Preventing and Eliminating Risks

Firstly, the New Guideline pushes forward the modernization of supervision system and supervision capability. It emphasizes the significance to strengthen corporate governance and internal control for insurers, to improve the supervision of market behaviors, and to establish the overall framework of China’s second generation of solvency supervision system.

Secondly, it advocates improving the protections for insurance consumers. It encourages insurance industry to explore multi-level dispute resolution system to successfully resolve conflicts between consumers and insurance enterprises with litigation, arbitration and mediation.

Thirdly, it reminds that insurance industry shall properly handle the relationship between innovation-driven development and risk prevention, and shall ensure that no systematic or regional financial risks will occur.

(9) Reinforce Infrastructure Construction and Optimize Developmental Environment for Insurance Industry

In the end, the New Guideline requires insurance enterprises to actively take part in and accelerate the construction of social credit system, cultivate insurance good faith culture and enhance the connection and sharing between insurance credit information and social credit information. It also recommends insurance industry establish various risk databases.

3. Conclusions

Conclusively, the New Guideline indicates the great progresses in developing insurance industry, and sets a good arena for insurance industry. We have reasons to believe that with the encouragement of the New Guideline, there will be forthcoming new regulations regarding insurance investments abroad, development of liability products and emerging of CAT bond soon.


[1] Some Opinions of the State Council concerning the Reform and Development of the Insurance Industry