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The new Notification issued by CIRC may sentence the death of lots of small and medium- size insurance intermediaries.

On the last day of 2009, CIRC promulgated the Notification on Implementing the Supervision Regulation on Corporate Insurance Agency, the Supervision Regulation on Insurance Brokerage and the Supervision Regulation on Insurance Adjustment Institution (hereinafter referred to as three supervision regulations). According to this notification, the capital of all insurance intermediaries must reach the threshold provided on the three supervision regulations before October 1st, 2012.Continue Reading Will It Be A Death Sentence For Small Insurance Intermediaries?

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. Continue Reading Establishing Representative Office of Insurance Company in China (1)

On December 22, 2009, the Ministry of Finance and CIRC jointly published Relevant Accounting Rules on Insurance Contract (“the Rule”). The long awaited rule finally lifted its veil at the end of this year.

Government officials from Ministry of Finance and CIRC commented on the rule. According to the officials, the rule is designed to eliminate the discrepancies existing in the accounting standards of A-share annual report and H-share annual report. All insurance companies are required to follow the rule in creating the 2009 financial report.

The rule mainly covers three components: split-up of mixed insurance contract, major risk evaluation and calculation of reserves of insurance contract. Continue Reading Relevant Accounting Rules on Insurance Contract Published

Gross negligence is a familiar concept in insurance policies sold in the Chinese market, particularly property policies. The all-risk policy issued by the People’s Insurance Company of China and the contractual liability insurance provided by newcomers to the industry, including the policies offered by foreign insurers, exclude accidents resulting from the insured’s gross negligence. Although this position seems clear in principle, it can be harder to determine in practice, as the fire at China Central Television (CCTV) has demonstrated.Continue Reading Defining ‘Gross Negligence’: Will Insurers Be Left Exposed?

Industry experts expect the China Insurance Regulatory Commission to announce the Detailed Rules for Investment in Unlisted Companies’ Equity by Insurance Companies and the Detailed Rules for Investment in Real Estate by Insurance Companies in October 2009. It has already published five sets of rules concerning insurance funds’ investment channels and their investment in infrastructure projects, which were issued on April 7 2009.Continue Reading Insurance Companies Await Regulator’s Rules on Private Equity

With the rapid development of Chinese insurance market and the trend of the financial deregulation, more and more foreign financial institutions want to invest in Chinese insurance companies. How to invest in a Chinese insurance company are concerns of many of my foreign clients. As you know, there are two basic accesses for foreign financial institutions to invest in Chinese insurance company, one is to establish a “foreign funded” insurance company with its Chinese partners in China, the other is to purchase a Chinese insurance company’s equities. This article focuses on the second one.Continue Reading Accesses for Foreign Insurance Company’s Equity Investment in Chinese Insurance Company

These days, more and more Chinese people prefer buying policy issued by foreign insurance companies. Compared to the current under-developed situation of Chinese insurance industry, many Chinese Insured think that foreign insurance companies may offer services that more mature and cover more aspects. Driven by the high profit Chinese insurance market may generate, many foreign insurance companies tries to market their insurance products in China. However, there are real barriers and potential legal risks to foreign insurance companies when they are engaging in marketing their products in China.Continue Reading Can Foreign Insurance Company Sell Policy to Chinese Residents Overseas

The regulation of corporate governance structures is the latest and most important development to the international regulation. For the purpose to strengthen the insurance industry in China and in the light of international experience, China Insurance Regulatory Commission (CIRC) promulgated the Guiding Opinion on Regulating the Insurance Company Corporate Governance Structure ( Trial Implementation) (Guiding Opinion on 5 January 2006. This Guiding Opinion is applicable to shareholding insurance companies. Other insurance companies and insurance asset management companies may also refer to this Guiding Opinion for implementation. The main contents of this Guiding Opinion are as follows: 1),strengthen majority shareholder obligations; 2), strengthen Board of Directors construction functions; 3),ensure Supervisory Board Function;4) regulate management level operation; 5),strengthen affiliated transaction and information disclosure management; and 6) corporate governance structure supervision and administration.

Majority shareholder having significant influence on an insurance company’s operation and management must have excellent financial conditions and continuous investment capabilities, must support the insurance company in improving its solvency, and must not use its special positions to damage the lawful rights and interest of the insurance company, the insured, the minority shareholders and other interest parties.

Where the insurance company’s shareholders are in an affiliate relationship with one another, they must take the initiative to report this to the Board of Directors. The insurance company must report its shareholders’ affiliated relationship to CIRC on a timely basis.

Continue Reading Regulations of Corporate Governance Structure of Insurance Companies