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Reports and Analysis
China – Suspension of Approval Of New Insurance Agencies.

29 April, 2012

 

 

On 26 March 2012, China Insurance Regulatory Commission (“CIRC”) issued the Notice on Suspension of Market Entry Approval of Regional Insurance Agencies and Certain Part-time Insurance Agencies (“Notice”).

 

Pursuant to the Notice, the CIRC and its local offices will suspend granting new licences to full-time insurance agencies operating on a regional basis (“Regional Insurance Agencies”) as well as to branch offices of existing Regional Insurance Agencies.  In addition, no new licences for part-time insurance agency businesses will be granted unless the respective applicant is a financial institution or a China Post office. 
 
The CIRC emphasised in the Notice that its local offices shall continue to 
support the establishment of insurance intermediary groups and full-time 
insurance agencies operating on a nationwide basis, as well as continue to support their respective branch offices.
 
Under the Provisions on Supervision of Full-time Insurance Agencies (which came into force on 1 October 2009), the paid-up capital threshold for a full-time insurance agency is RMB 2 million. However, the CIRC indicated that the majority of the Regional Insurance Agencies in the market do not meet the above mentioned minimum paid-up capital requirement. Most of the Regional Insurance Agencies only engage in the auto insurance business. The CIRC had previously required full-time insurance agencies established prior to 1 October 2009 to increase their paid-up capital to meet the minimum statutory requirement (i.e. RMB 2 million). If they failed to do so, their operational licences could only be extended until 1 October 2012.
 
On the other hand, there are currently more than 190,000 part-time insurance agencies in China. Amongst those part-time insurance agencies, more than 130,000 are local offices of banks and the China Post Office. The other 50,000 part-time insurance agencies are mainly involved in the auto insurance business.
 
It appears that the CIRC is aiming to increase the entry thresholds of Regional Insurance Agencies and part-time insurance agencies with a view to reducing the number, as well as, enhancing the quality of insurance agencies in the market. Officials of the CIRC indicated that the suspension of the approvalis merely a transitional measure and the CIRC intends to further amend the Provisions on Supervision of Full-time Insurance Agencies to set higher market entry requirements. It has also been indicated that the CIRC may also consider removing Regional Insurance Agencies as a type of insurance agency in the future. 

 

 

For further information, please contact:

 

Carrie Yang, Partner, Clyde & Co
 
Amanda Li, Clyde & Co
 
 

 

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