Jurisdiction - China
Reports and Analysis
China – CIRC Relaxes Rules On Cross-Border RMB Settlement For The Reinsurance Business.
28 July, 2013

 

On 24 June 2013, the China Insurance Regulatory Commission (“CIRC”) promulgated the Supplemental Notice on Matters Related to Cross-Border RMB settlement for Reinsurance Business (“Supplemental Notice”) to relax the restriction on cross-border RMBdenominated clearing reinsurance.


By way of background, the CIRC issued the Notice on Matters Related to Cross-Border RMB Settlement for Reinsurance Business (“Original Notice”) on 23 August 2011. The Original Notice set out the requirements and guidelines under which Chinese insurers were allowed to write RMBdenominated clearing reinsurance business from overseas markets. In accordance with Article 4 of the Original Notice, the reinsurance premiums that could be settled in RMB were limited to those recognised under the Accounting Standards for Business Enterprises and the Rules concerning Accounting Treatment of Insurance Contracts. As a result, reinsurance premiums under certain investment-linked policies, universal policies and other crossborder reinsurance arrangements that cannot pass the significantinsurance-risk test as set out in the Rules concerning Accounting Treatment of Insurance Contracts could not be settled in RMB. 


The Supplemental Notice deleted Article 4 in the Original Notice mentioned above. It seems that the cross-border RMB settlement may now be permitted for the reinsurance of investment-linked policies and universal policies, following the issuance of the Supplemental Notice.


In addition, the Supplemental Notice requires the insurers involved in settling cross-border reinsurance transactions in RMB to submit an annual report on the related reinsurance transactions which should include information of premium, line of business, the home country and region of the ceding company, profitability, cost and cash flow by 30th April every year. The aim of this requirement is to enhance operational management of companies participating in such reinsurance transactions.


China has, since 2009, been gradually introducing measures to relax control over RMB as China plans to make RMB an international currency. This Supplemental Notice is one supporting measure taken by the CIRC amongst a set of regulations released by various governmental authorities recently to facilitate crossborder RMB transactions

 
 
For further information about this article, please contact:
 
Carrie Yang, Partner, Clyde & Co
carrie.yang@clydeco.com
 
Alina Zhu, Clyde & Co
alina.zhu@clydeco.com

 

 
 

 

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