26 August, 2013

 

Legal News & Analysis – Asia Pacific – China – Insurance & Reinsurance

 

CIRC lifts 20 percent ceiling on investment in domestic Chinese insurance companies

 

The China Insurance Regulatory Commission (“CIRC”) increased the ceiling on investment in Chinese insurance companies that have been established for at least three years from 20% to 51% of the total capital .

 

The change was introduced in the Notice on Issues concerning Article 4 of the ‘Administrative Measures for Equities of Insurance Companies’, released on 9 April 2013.

 

In practice, a single shareholder (inclusive of equity owned by an investor’s affiliates) can now contribute up to 51% of the total capital of an insurance company.

 

The new investment ceiling does not change the application of the existing regime for foreign invested insurance companies and in particular does not change the cap on foreign investment in life insurance companies, which remains at 50%.

 

Limited partnership equity investment allowed in insurance companies

 

CIRC allowed the investment in Chinese domestic insurance companies made by limited partnership equity investment enterprises.

 

The change was introduced in the Notice on Relevant Issues regarding Investment and Shareholding of Limited Partnership Equity Investment Enterprises in Insurance Companies, released on 17 April 2013. The Notice sets out the requirements for investment by a limited partnership in a Chinese domestic insurance company. If the aggregate foreign shareholding in an insurance company is less than 25%, this company is considered a domestic insurance company.

 

The Notice provides that:

 

• the contribution or shareholding portion of one limited partnership in a single insurance company cannot exceed 5%, and 15% in total for contributions made by all limited partnership enterprises
• the limited partnership may not be the largest shareholder, controlling shareholder, or actual controller of the insurance company, and may not participate in the operation and management of the insurance company
• the limited partnership must transfer its equity in the insurance company before the expiry of its business term.

 

Classified administrative measures for business scope of insurance companies

 

On 2 May 2013, CIRC released a circular on Classified Administrative Measures for the Business Scope of Insurance Companies (“Measures”).

 

The Measures divide the business scope of insurance companies into two categories: basic business and extended business.

 

Property insurance companies may engage in five basic businesses and four extended businesses. Life insurance companies may engage in five basic businesses and two extended businesses.

 

The Measures show that newly established insurance companies may only apply for the basic business category. Insurance companies applying to conduct extended business must meet financial, risk management, legal and compliance requirements.

 

Stricter protection of customer data

 

CIRC is seeking the second round of opinion on its Administrative Provisions on the Authenticity of Information of Life Insurance Customers. The CIRC’s core provisions aim to:

 

• restrict the scope of organisations, departments, and personnel that life insurance companies share customer data with
• ensure authenticity of customer data by requiring life insurance companies to establish, improve, and implement their management systems and internal operating rules
• stop insurance salespeople from disclosing and reselling customer data, and inducing customers to provide false personal information.

 

 

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