3 October, 2015
In order to implement the reforms on administrative examination and the registered capital registration system, the CIRC issued the Decision on Revising the Administrative Measures for the Establishment of Overseas Insurance Institutions by Insurance Companies and Other Seven Rules (Draft for Comment) on 3 August 2015.
The eight rules proposed to be amended are:
- Measures for the Administration of the Establishment of Overseas Insurance Institutions by Insurance Companies)
- Administrative Provisions on Insurance Companies
- Provisions for the Supervision and Administration of Professional Insurance Agencies
- Provisions on the Supervision and Administration of Insurance Brokers
- Provisions on the Supervision and Administration of Claims Adjusters
- Provisions of the China Insurance Regulatory Commission on Administrative Penalty Procedures
- Administrative Provisions on Reinsurance Business
- Administrative Measures on Insurance Clauses and Premium Rates of Life Insurers
Among other reforms, the proposals recommend relaxing the restrictions on establishment of overseas insurance institutions and providing insurance companies with more decision-making powers. The existing Article 12 of the Measures for the Administration of the Establishment of Overseas Insurance Institutions by Insurance Companies sets down requirements that an insurance company that establishes non-business institutions such as representative agencies, liaison agencies, or offices outside China shall satisfy the following conditions:
a. it has legitimate sources of foreign exchange funds;
b. its internal control system and risk management system comply with the relevant provisions of the CIRC;
c. there are no records of material penalties in the recent 2 years; and
d. other conditions prescribed by the CIRC.
The existing Article 13 states that an insurance company that applies to establish non-business institutions such as representative agencies, liaison agencies, or offices outside China shall submit the following materials to the CIRC:
- description of the basic circumstance of such non-business institutions as overseas representative agencies, liaison agencies, or offices to be established, including the name, the domicile, the budget of operating fund, and copies of the resumes of the persons in charge and ID certification materials; and
- other materials prescribed by the CIRC.
These two Articles will be deleted if the proposals are implemented.
Further, the capital requirements on branches of insurance professional agents are proposed to be relaxed, which will involve amendment of Article 12 of the Provisions for the Supervision and Administration of Professional Insurance Agencies. Currently, Article 12 requires that an insurance professional agent that is established with the minimum registered capital as specified in the provisions may apply to establish three branches. Thereafter, for each application to establish a new branch, it shall at least increase its registered capital by RMB200,000. For an application to establish a branch for the first time in any province, autonomous region or municipality other than that where the insurance professional agent is domiciled, it shall at least increase its registered capital by RMB1 million.
The new Article 12 will simply state that after receiving an application for the establishment of an insurance professional agent, CIRC may remind the applicant of the risks thereof, discuss with the applicant matters concerning the establishment, and inquire about and understand the market development strategy, business expansion plan, internal control system building and staff structure, etc., of the agent to the established.
The above proposed amendments, if implemented, will remove a number of major restrictions which affect insurance institutions when they make their outbound investments, and will also streamline the existing regulatory process for such investments.
For further information, please contact:
Martin Tam, Partner, Baker & McKenzie