Where the law stipulates or conditions that the parties to a contract agree on are met, an insurance contract may be rescinded if the parties to the contract reach a consensus through consultation or either a party to the contract executes the termination right to cancel the insurance contract. Usually, without consent of insurance companies, the insured may cancel the insurance policy unilaterally at any time. That because the insureds buy an insurance product is to protect them from unknown risks, so they have right to choose how and when to protect themselves. The Insurance Law (2009) stipulates that otherwise stipulated by other laws and regulations, or agreed by both parties in insurance contract, after the formation of insurance contract, the insurance contract may be rescinded by the insured. On the contrary, to protect the interest of insureds, the Insurance law (2009) generally prohibits the insurer to terminate the contract casually. Only under some special circumstances, the insurer may be allowed to cancel the insurance contract. Here we simply give a brief summary of those circumstances.

Continue Reading Brief Summary of Circumstances of Terminating an Insurance Contract by Insurance Companies

According to the Administration of Stock Investments by Insurance Institutional Investors Tentative Procedure (hereinafter referred to as “Tentative Procedure”),as the “insurance institutional investors”, qualified insurance companies and insurance asset management companies are entitled to invest in stocks. Insurance companies include the insurance group companies and the insurance holding company. The difference of qualification requirements for insurance companies and insurance asset management companies [1] is, if the insurance asset management companies satisfy article 5 of the Tentative Procedure, they can invest in stocks directly without CIRC’s approval and if the insurance companies satisfy article 7 of the Tentative Procedure and get approval from CIRC, they can invest in stocks directly as well.

Continue Reading Investment in Stock Market by Insurance Funds (1)

As we all know, capital is crucial for insurance company. Only with enough funds can an insurance company have ability to cover the exposures. With adequate capital, an insurance company may better develop the business, i.e. release more ads, or establish more branches, to make more profits. It is possible that during the operation, an insurance company has no sufficient capital to support its business, and under such circumstance, the insurance company will need to raise funds to replenish its capital.

Generally speaking, there are four ways for an insurance company to supplement its capital:1. IPO or Seasoned Equity Offering; 2. getting additional investment by current shareholders; 3.getting money from private offer; and 4. allotting subordinated debt. For Chinese insurance companies, the first three ways may encounter hurdles or difficulties in practice. First of all, IPO is not easy for insurance companies, because many of them, especially small and medium-sized insurance companies, may not be able to meet the high standard of IPO. Secondly, current shareholders may be more willing to use financial vehicle, rather than funds of their own, to run the insurance company. It might be very difficult to raise money from current shareholders. Lastly, due to the financial crises, many institutions have insufficient funds to make the investment. Then issuing subordinated debt becomes a practical option for many insurance companies. According to the CIRC, 10 insurance companies were approved in 2009 to issue subordinated debt. The total amount of debt reaches RMB 18 billion.

Continue Reading The Issuing of Subordinated Debt of Insurance Companies in China

On November 26, 2009, China’s Banking Regulatory Commission (CBRC) issued the Pilot Administrative Measures for Commercial Banks to Make Equity Investment in Insurance Companies (the “Measures”). The Measures cover several key aspects of commercial banks’ equity investment in insurance companies, i.e., market access, risk control and regulatory supervision. Its enactment marks the official recognition of cross-sector operations within the banking and insurance industries. By and large, the Measures establishes the regulatory framework for enhanced partnership between the banking and insurance industry. Interestingly though, it has streaks of competition law in its provisions, which has the effect of fostering healthier competition in the future financial market of integrated operation.

Continue Reading A Look At the New Rule On Financial Integrated Operation: From the Perspective of Competition Law

The shareholders’ qualification and the appointment qualification of directors, supervisors and senior management personnel of an insurance company shall, in accordance with the Provision on the Qualifications of Directors, Supervisors and Senior Managers of Insurance Companies newly revised by CIRC on January 8th, 2010 and Administration of Insurance Companies Regulation newly revised by CIRC on September 25th, 2009 and other regulations, be submitted to CIRC for examination and approval thereof. If they fail to perform their duties or there are significant negligence of duty, CIRC may order the insurance company to replace such personnel or cancel their appointment qualifications.

Continue Reading Corporate Governance Structure of Insurance Companies

During Christmas holiday of 2009, China Pacific Insurance (Group) Co., Ltd was listed in the Stock Exchange of Hong Kong Limited, with the stock code”02601” and the stock name of “CPIC”. It became the forth insurance companies which were listed in foreign Stock Exchange in China. The other three are PICC, China Life and Ping An Insurance. The IPO of CPIC gives more hopes for insurance companies to IPO in 2010. PICC just finished the reform to establish a joint stock system for enterprises and its CEO Wu Yan said in public that PICC will choose appropriate time to be listed in A share in future. Besides, China Reinsurance (Group) Corporation, Tian Ping Insurance Company, New China Life Insurance Company all show their ambitious to IPO. For many insurance companies, 2010 will be a starting year for them to IPO.

Continue Reading 2010 Shall Be An IPO Starting Year For Insurance Companies

I focus mainly on two legal areas: insurance law and anti-monopoly law. Both these two areas experienced a dramatic progress in 2009. In my personal practice, I see some interesting overlapping of these two areas. In this article, I will address two cases in vehicle insurance market regarding the accusation of violation of China Anti-Monopoly Law (AML).

Continue Reading Two Antitrust Cases in Insurance Law Area

On 25 January 2010, European Commission said that it is ready to review a plan by the world’s second and third largest iron ore miners, Rio Tinto and BHP Biliton, to combine some iron ore mining operations in Australia. The European antitrust watchdog said that it would investigate whether the companies’ plan to pool iron ore mining in western Australia would affect the global prices or supply for iron ore transported by sea, known as seaborne iron ore. The Commission set no deadline for completion of the investigation, citing the complexity of the case, cooperation from the companies involved and exercise of the rights of defense, among other factors, to justify the open-ended time limit.

Continue Reading Will Rio Tinto and BHP Billiton Make It This Time? A Few Comments From The Perspective Of Antitrust Law

Considering new problems generated in recent years, CIRC revised current Measures for Administrative Reconsideration of CIRC (hereinafter as “Old Measures”), and published the new one (hereinafter as “New Measures”). The New Measures has changed some significant aspects of procedures of administrative reconsideration and it will be effected from 1st of March.

Continue Reading CIRC Published New Measures for Administrative Reconsideration of CIRC

The new revised Provision on the Qualifications of Directors, Supervisors and Senior Managers of Insurance Companies was published by CIRC and it will be effected on 1st of April. It could be seen as a storm of supervision blowing from CIRC at the beginning of the year. This provision adjusts the scope and manners of CIRC’s qualification management system, strengthens the qualification of directors, supervisors and senior managers, and improves the long lasting supervision regulation.

Continue Reading Revised Provision On The Qualifications Of Directors, Supervisors And Senior Managers Of Insurance Companies Published