PUBLICATIONS

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1. Decisions on Amending the Implementing Rules for the Administrative Regulations on Foreign-invested Insurance Companies (Draft for Comments) 

On December 31, 2020, CBIRC published the Decisions on Amending the Implementing Rules for the Administrative Regulations on Foreign-invested Insurance Companies (Draft for Comments) to solicit public comments until February 15, 2021.  The Draft was intended to implement the relevant opening-up measures for the financial sectors and the relevant amendments to the Administrative Regulations on Foreign-invested Insurance Companies, and has clarified the market access requirements for foreign insurance group companies and foreign financial institutions, and removed the provisions related to the 51% foreign ownership cap on life insurance companies that had been abolished. 

A foreign insurance group company refers to a company that has been registered in accordance with the law in its home country and exercises control, joint control and significant influence over one or more insurance companies within the group.  According to the Draft, the qualification requirements for foreign insurance group companies to apply to establish an insurance company are as follows: 

1)having total assets of no less than USD5 billion as of the end of the year prior to the application;

2)the home regulator of the applicant agrees to the application.

3)its home country or region has a sound system for insurance regulation, and the applicant or its main insurance subsidiary is under the effective supervision of its home regulator;

4)its foreign insurance group or its main insurance subsidiary meets the solvency requirements of its home country or region; and  

5)any other prudent conditions required by CBIRC. 

Main insurance subsidiaries refer to those insurance companies that are controlled or jointly controlled by the insurance group companies, that are among the largest in terms of total assets as of the year end before the application, and that account for no less than an aggregate of 60% of the consolidated insurance assets of the insurance groups. 

When a foreign-invested company changes its shareholders, the proposed acquirer or successor who is a foreign insurance company or foreign insurance group company should meet the qualification requirements for establishing a foreign-invested insurance company. 

A foreign financial institution refers to a financial institution registered outside of China and approved or licensed by the financial regulator of its home country or region.  If a foreign financial institution other than an insurance company or insurance group becomes a shareholder of a foreign-invested insurance company, the provisions of the Administrative Measures on Equities of Insurance Companies should apply. 

If foreign insurance companies and foreign insurance group companies, as shareholders of insurance companies located in China, wish to establish an insurance group company, the regulatory rules on insurance group companies will apply.  Where the insurance group company rules are silent, the Administrative Regulations on Foreign-invested Insurance Companies and relevant Implementing Rules should apply as a reference. 

If an investment in a foreign-invested insurance company affects or may affect national security, a foreign investment security review should be conducted.    

2. Regulatory Measures for Online Insurance Business

On December 14, 2020, CBIRC promulgated the Regulatory Measures for the Online Insurance Business, which will take effect on February 1, 2021.  Insurance institutions should complete the rectification of relevant issues within the following timeframe: rectifying issues concerning improving internal systems, marketing and publicity, sales management and information disclosure, etc. within 3 months after the effective date (i.e. before May 1, 2021), rectifying issues concerning business and operation within 6 months (i.e. before August 1, 2021), and obtaining the cybersecurity tiered protection certification for the self-operated online platforms within 12 months (i.e. before February 1, 2022).

Compared to the current rules, the Measures have reflected the following important changes:

Operating entities.  The Measures have abolished the concept of third-party online platforms and provided that only insurance institutions (including insurance companies and insurance intermediaries) and their self-operated online platforms are permitted to conduct online insurance business.  Among other requirements, professional insurance intermediaries conducting online insurance business must be nationwide institutions.

Qualification requirements.  Insurance institutions can conduct online insurance business without applying for licenses or making record filings so long as they meet the requirements provided in the Measures, including the following:

  • having completed the record filing for the website; having a core business information system which is effectively isolated from other systems; and

  • obtaining the cybersecurity tiered protection certification as required for the self-operated online platforms and the supporting systems.  Those platforms and systems with policy selling or purchasing functions must receive at least a Tier 3 certification, and those without such functions must receive at least a Tier 2 certification; and

  • designating a senior management member as the person in charge of online insurance business.

Internet enterprises can apply for insurance agency license.  In addition to meeting the above qualification requirements, Internet enterprises should also have obvious advantages in terms of application scenarios and network flows, systematic policies for consumer protection and professional staff familiar with insurance business, etc.

Prohibited activities.  The Measures provide that non-insurance institutions are prohibited from conducting online insurance business, including providing consulting services for insurance products, comparing insurance products, calculating premiums and comparing quotations, designing insurance plans for policyholders, handling application procedures for policyholders and collecting premiums.

Restrictions on product sales.  If P&C insurance companies have internal control management capabilities and can provide local services to meet customers’ need, they can also sell P&C insurance products in the provincial regions and cities specifically designated for state planning purposes where they have not set up provincial branches.  Life insurance companies are allowed to sell life insurance products across the country through the Internet if they can meet the relevant requirements.

3. Circular on Matters concerning Optimization of Supervision and Regulation of Investment Management Capabilities of Insurance Institutions 

On September 30, 2020, CBIRC issued the Circular on Matters concerning Optimization of Supervision and Regulation of Investment Management Capabilities of Insurance Institutions.  The Circular adjusted the previous 7 categories of investment management capabilities, abolished the record filing of such capabilities with CBIRC and adopted a new regulatory approach that requires the insurance institutions to make self-assessment and information disclosure and require insurance regulators to conduct continuous supervision.  The Circular applies to insurance group (holding) companies, insurance companies and insurance asset management institutions. 

Investment management capabilities re-categorized.  The Circular has adjusted the categories of the investment management capabilities, integrated the “capability for innovative investment schemes for infrastructure” and the “capability for innovative investment schemes for real estate” into the “capability for debt investment schemes”, and introduced a new “capability for equity investment schemes”.  

According to the Circular, the investment management capabilities of insurance institutions include the following seven categories: capability for credit risks, capability for stock investment, capability for equity investment, capability for real estate investment, capability for derivative trading, capability for debt investment schemes and capability for equity investment schemes.  Among others, the capabilities for equity investment and real estate investment are applicable only to insurance companies and insurance group (holding) companies, while the capabilities for debt investment schemes and equity investment schemes are applicable only to insurance asset management companies. 

Record filing abolished for investment management capabilities.  The Circular has removed the record filing requirement related to insurance institutions’ investment management capabilities, and adopted a new regulatory approach that requires insurance institutions to make self-assessment and information disclosure and requires insurance regulators to conduct continuous supervision. 

The information disclosure required for insurance institutions’ investment management capabilities includes initial disclosure, semi-annual disclosure and major event disclosure.  Insurance institutions which have completed a record filing for the relevant investment management capabilities before the promulgation of the Circular will be exempted from the initial disclosure. 

Requirements for development of investment management capabilities.  The Circular requires the audit committees of insurance institutions to at least annually review the development status of their investment management capabilities.  Insurance institutions should designate at least 2 risk owners for each capability, including an administrative risk owner and a professional risk owner.  The Circular also sets out various specific requirements for the development of each capability.    

4. Circular on Matters Related to Financial Equity Investments of Insurance Funds

On November 12, 2020, CBIRC issued the Circular on Matters Related to Financial Equity Investments of Insurance Funds, which took effect immediately.  The Circular has removed the restrictions on permissible industries for financial equity investments of insurance funds in order to strengthen insurance funds’ support to the real economy by way of equity investments.  The Circular applies to insurance group (holding) companies, insurance companies and insurance asset management companies.

Concept of financial investment clarified.  Financial equity investments refer to those investments where insurance institutions and their affiliates do not control or jointly control the target companies.

Restrictions on permissible industries removed.  When making financial investments in the equity interest of enterprises in and outside of China, insurance institutions can independently decide which industries to invest in.  Insurance institutions should specify the scope of industries and major conditions for the target companies and obtain the approval of the board of directors, management or their authorized agencies.

Negative list established.  The Circular has set out 10 circumstances which the target companies should not fall under, including being involved in a material breach of contract in the recent three years, or directly engaging in real estate development and construction (including development or sale of commercial property), etc.

5. Regulatory Provisions on Insurance Agencies

On November 12, 2020, CBIRC promulgated the Regulatory Provisions on Insurance Agencies, which took effect on January 1, 2021.  The Provisions have reconciled the regulatory rules for professional agencies, part-time agencies and individual insurance agents. 

Minimum registered capital adjusted.  The minimum registered capital for regional professional insurance agency companies is increased to RMB20 million, while the minimum registered capital for nationwide professional insurance agency companies remains to be RMB50 million.

Investment restrictions.  Employees and individual insurance agents of insurance companies and practitioners of professional insurance intermediary institutions are not allowed to invest in other professional insurance agency companies.

Three-year license term changed to indefinite term.  An insurance agency license, once issued, will remain effective indefinitely and no license renewal will be required.

Branching requirements.  The Provisions set forth certain qualification requirements for professional insurance agency companies to establish branches, including, for example, the company should not be subject to any criminal penalty or major administrative penalty in the previous year, and none of the company’s branches established in the recent two years has exited the market within one year after commencement of operations. 

Maximum limits removed for professional liability insurance and deposit.  The Provisions have abolished the RMB50 million maximum limit for the professional liability insurance purchased by a professional insurance agency company and the RMB1 million cap on the deposit payable by such company.  If such company increases its registered capital, the deposit amount should be increased proportionately.

Practice registration.  Insurance companies and insurance agency companies (professional or part-time) should complete practice registration for their individual insurance agents and their insurance agency practitioners.  Individual insurance agents and insurance agency practitioners can only apply for practice registration through one institution.

6. Circular on Matters Relating to Development of Independent Individual Insurance Agents

On December 23, 2020, CBIRC issued the Circular on Matters Relating to Development of Independent Individual Insurance Agents, which took effect immediately.  The Circular applies to professional insurance agency and brokerage institutions and their practitioners “as a reference”.

Independent individual insurance agents refer to those insurance sales practitioners who sign agency agreements with insurance companies directly and sell insurance products independently.  Independent individual insurance agents should calculate their commissions based on the premiums collected and should not develop any marketing and sales teams.  They can engage no more than 3 persons to assist with ancillary work such as policy issuance and after-sales services. 

Independent individual insurance agents should meet the basic qualification requirements including: having a junior college degree or above, or having a degree of senior high school if the agent has 5 or more years of insurance work experience; having not received any administrative penalties from any financial regulators in the recent three years, etc. 

Where an insurance company sells products of other insurance companies, independent individual insurance agents can, within the scope of the insurance company’s authorization, handle the insurance business of such other insurance companies.

Agency agreements with independent individual insurance agents should be signed by an insurance company’s headquarters or branches at the prefecture or municipal level or above.  The headquarters and provincial branches of insurance companies should report to CBIRC or relevant CBIRC bureaus respectively in writing within 20 business days before implementation of the independent individual insurance agent model.  The report should cover the work plan, management system, business status, risk managements, etc.   

7. Regulatory Provisions on Informatization of Insurance Intermediaries (Draft for Comments) 

In December 2020, CBIRC issued the draft Regulatory Provisions on Informatization of Insurance Intermediaries to solicit comments from the industry.  If adopted, the Provisions will supersede the Circular on Strengthening the Informatization of Insurance Intermediaries.

The legal representative of insurance intermediaries should be primarily responsible for the informatization of such institutions.  Insurance intermediaries should designate a senior management member to coordinate the informatization of the legal person entities and their branches.  The legal person entities should set up a special department or informatization management positions, and have at least one full-time staff member to be responsible for informatization.  The branches should have at least one full-time staff member to assist the legal person entities with informatization. 

Upon occurrence of an information-related emergency event, an insurance intermediary should report to its local CBIRC bureau within 24 hours in accordance with the relevant rules.  Insurance intermediaries should strive to report relevant information by telephone within 30 minutes and in writing within 1 hour after occurrence of a particularly significant or sensitive information emergency event.

The Draft provides requirements on insurance intermediaries’ information systems for business management, financial management and staff management, including data exchange among business, finance and staff management systems, system connection and data exchange with cooperating insurance companies, and data exchange with the regulatory information system for insurance intermediaries, etc.

Insurance intermediaries can develop information systems independently or by way of outsourcing including joint development, customized development, outsourced development and purchase of cloud services.  Insurance intermediaries should, in any event, be responsible for information security management.  If insurance intermediaries outsource informatization work to equity related enterprises (including their shareholders and investee companies), such insurance intermediaries should implement effective management in accordance with the outsourcing requirements.

Insurance intermediaries should reasonably determine the security tier of their information systems, and obtain the corresponding cybersecurity tiered protection certification. 

Insurance intermediaries should take protective measures for important data and personal information, and take reliable precautions for data storage and back-up.  The system data should be kept for at least five years, and the system log should be kept for at least six months. 

Before issuing the license to or completing the filing for insurance intermediaries, CBIRC and its local bureaus should review the status of their legal entities’ informatization work.  If the legal entities fail to meet the regulatory requirements, CBIRC or its local bureaus will not issue the license or complete the filing.

8. Regulatory Measures for Liability Insurance Business

On December 22, 2020, CBIRC promulgated the Regulatory Measures for Liability Insurance Business, which took effect on January 1, 2021. 

The Measures provide that insurance companies should not insure the following risks or losses through liability insurance: i) liability for losses from accidents intentionally caused by the insured; ii) criminal and administrative penalties; iii) credit risks of contract performance; iv) losses that are certain to occur; v) speculative risks; and vi) other risks or losses provided by CBIRC.

When conducting third party liability and other forms of auto insurance, insurance companies should comply with the auto insurance related rules.  Insurance companies are not permitted to conduct third party liability auto insurance by way of providing any form of main coverage or supplemental coverage of liability insurance other than auto insurance. 

The Measures prohibit certain activities, including actually underwriting financing credit risks by way of underwriting liabilities of guarantors, giving an undertaking that is not in line with the principles of insurance, eliminating or restricting competition with the assistance of intermediaries, industry associations or other organizations.

Insurance companies should formulate the standards and internal authorization requirements for high risk business.  High risk business should be managed by the headquarters or conducted within the scope of authorization by the headquarters.   

9. Administrative Measures on Market Access for Branches of Insurance Companies (Draft for Comments) 

On November 10, 2020, CBIRC published the draft Administrative Measures on Market Access for Branches of Insurance Companies to solicit comments from the industry.

Insurance companies (including specialized insurance companies) should not establish a branch outside of the jurisdiction of the local CBIRC bureaus where such companies are registered until they have commenced operations for no less than 2 years. 

Qualification requirements.  The Draft specifies the qualification requirements for insurance companies to establish a provincial branch, including having a comprehensive solvency ratio higher than 150% and a core solvency ratio of higher than 75% during each of the two quarters before the application, having an Integrated Risk Rating of no less than Class B during each of the two quarters before the application, having a corporate governance assessment result of no less than Grade C during the prior year, and having a person in charge of the preparation who meets the qualification requirements for general manager of the provincial branch, etc.

Disqualifications.  An insurance company applying to establish a branch should not fall under the following circumstances: being subject to major administrative penalties by financial regulators in the recent two years or being subject to insurance administrative penalties in the previous year; the insurance company or its directors, supervisors or senior management personnel being investigated by financial regulators or judicial authorities for suspected major violations of laws and crimes arising out of their work behaviors, the insurance company or its provincial branches being involved in major cybersecurity events affecting their business stability in the previous year, etc.

Change of business premises and closure of branches.  A branch is allowed to change its business premises but only within the regions designated at the time of its application for establishment, and is not allowed to move to another region.  An applicant applying to close a branch should submit its policies for consumer rights protection and plans for subsequent handling of existing business.

10. Administrative Measures on Policy Loans of Life Insurance Companies (Draft for Comments)

On October 29, 2020, CBIRC published the draft Administrative Measures on Policy Loans of Life Insurance Companies to solicit public comments.

Scope of policy loans.  Policy loans are only permissible for individual life insurance policies with cash value and a term of more than one year, and life insurance products with account value such as universal life insurance should be handled with reference to the provisions related to cash value under the Draft Measures.  Insurance companies should not provide policy loans to investment-linked insurance policies and group insurance policies.

Operational requirements.  If policy loans are available, the terms and conditions of relevant insurance products should include policy loan related provisions.  Insurance companies should document the loans in the form of loan agreements or policy endorsements.  Insurance companies should provide the relevant loan information to the basic financial credit information database maintained by the State, but should obtain the prior written consent of the policyholders.

Applicant, term of loan and interest rate.  Only policyholders can apply for policy loans.  If the insured is not the policyholder, the policyholder should obtain the written consent of the insured before making the application.  The term of loan should not be longer than the term of coverage, and should not exceed 12 months.  The interest rate should not be lower than the expected interest rate for the corresponding insurance products.  As to universal life insurance, the interest rate for policy loan should not be lower than the average of the actual interest rates during the previous year.  The loan amount should not be higher than 80% of the cash value of the policy at the time of loan application. 

Management requirements.  Insurance companies should have its policy loan business covered by their internal control system and submit relevant statistical data to CBIRC on a periodic basis.  Insurance companies should calculate minimum capital for policy loan business in accordance with relevant solvency rules and include the policy loan business in the integrated risk rating system.  Policy loans should be subject to the ratio restrictions on use of insurance funds; if the balance of policy loans exceeds 8% of an insurance company’s total assets, such insurance company should report to CBIRC and its policy loan business should be closely monitored.

Registration of pledge.  Insurance companies can register the policy pledges through policy pledge registration platforms, including the uniform registration platform established by the State for security interest on movables and rights and the registration platform recognized by CBIRC for insurance policy pledges.

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