Regulation of China on the Administration of Foreign-Funded Insurance Companies (2016 Revision)

• Document Number：Order No. 666 of the State Council
• Area of Law： Insurance
• Level of Authority： Administrative Regulations
• Date issued：02-06-2016
• Effective Date：02-01-2002
• Status： Effective
• Issuing Authority： State Council

Regulation of the People's Republic of China on the Administration of Foreign-Funded Insurance Companies
(Issued by Order No. 336 of the State Council of the People's Republic of China on December 12, 2001; amended in accordance with the Decision of the State Council on Amending the Regulation of the People's Republic of China on the Administration of Foreign-Funded Insurance Companies on May 30, 2013 for the first time; and revised in accordance with the Decision of the State Council on Amending the Regulation of the People's Republic of China on the Administration of Foreign-Funded Insurance Companies on February 6, 2016 for the second time)
Chapter I General Provisions
Article 1 This Regulation is developed for the purposes of satisfying the requirements of China's opening up and economic development, strengthening and improving the supervision and administration of foreign-funded insurance companies, and promoting the sound development of the insurance industry.
Article 2 For the purposes of this Regulation, “foreign-funded insurance companies” means the following insurance companies formed upon approval and operating within China in accordance with the relevant laws and administrative regulations of the People's Republic of China:
(1) Insurance companies formed within China by foreign insurance companies and Chinese companies or enterprises in the form of equity joint ventures (hereinafter referred to as “equity joint venture insurance companies”).
(2) Insurance companies formed within China by foreign insurance companies with foreign capital (hereinafter referred to as “wholly foreign-owned insurance companies”).
(3) Branches within China of foreign insurance companies (hereinafter referred to as “branches of foreign insurance companies”).
Article 3 Foreign-funded insurance companies must abide by the laws and regulations of China, and may not damage the public interest of China.
The lawful operations and legal rights and interests of foreign-funded insurance companies shall be protected by the laws of China.
Article 4 The China Insurance Regulatory Commission (hereinafter referred to as the “CIRC”) shall be responsible for the supervision and administration of foreign-funded insurance companies. The local offices of the CIRC shall, as authorized by the CIRC, conduct the routine supervision and administration of foreign-funded insurance companies within their respective jurisdictions.
Chapter II Formation and Registration
Article 5 The formation of a foreign-funded insurance company shall be subject to the approval of the CIRC.
The regions where foreign-funded insurance companies may be formed shall be determined by the CIRC according to the relevant provisions.
Article 6 For the formation of foreign-funded insurance companies engaging in personal insurance and foreign-funded insurance companies engaging in property insurance, the form of business and the proportion of foreign investment shall be determined by the CIRC according to the relevant provisions.
Article 7 The minimum registered capital of an equity joint venture insurance company or a wholly foreign-owned insurance company shall be 200 million yuan or an equivalent in freely convertible currencies, and must be paid-in monetary capital.
The head office of a foreign insurance company shall grant not less than 200 million yuan or an equivalent in freely convertible currencies to a branch of the foreign insurance company as working capital.
The CIRC may, according to the scope and scale of business of a foreign-funded insurance company, raise the minimum amount of the registered capital or working capital of the foreign-funded insurance companies.
Article 8 To apply for the formation of a foreign-funded insurance company, a foreign insurance company shall meet the following conditions:
(1) It has engaged in the insurance business for 30 years or more.
(2) It has been two years or more since the formation of its representative office within China.
(3) Its total assets at the end of the year before its application for the formation is filed were not less than five billion U.S. dollars.
(4) The country or region where it is located has a sound insurance regulation system, and it is under the effective regulation by the competent authorities of the country or region where it is located.
(5) It satisfies the solvency standards of the country or region where it is located.
(6) Its application has been approved by the competent authorities of the country or region where it is located.
(7) Other prudential conditions as set out by the CIRC.
Article 9 To form a foreign-funded insurance company, the applicant shall file a written application with the CIRC, and submit the following materials:
(1) A written application signed by the legal representative of the applicant, or if an equity joint venture insurance company is to be formed, a written application signed by the legal representatives of all the parties to the equity joint venture.
(2) The business license (duplicate) of a foreign applicant, a certificate on its satisfaction of the solvency standards, and an opinion on its application issued by the competent authorities of the country or region where the foreign applicant is located.
(3) The bylaws of a foreign applicant and its annual reports for the last three years.
(4) Materials on a Chinese applicant if an equity joint venture insurance company is to be formed.
(5) A feasibility study report and a formation preparation plan for the company to be formed.
(6) The names, resumes, and certificates of satisfaction of office qualifications of the persons in charge of the preparations for the formation of the company.
(7) Other materials as set out by the CIRC.
Article 10 The CIRC shall conduct a preliminary examination of an application for forming a foreign-funded insurance company, and within six months of receipt of complete application documents, decide whether to accept or reject the application. If it decides to accept the application, it shall issue a formal application form to the applicant; otherwise, it shall inform the applicant in writing of its rejection with an explanation of the reasons for the rejection.
Article 11 The applicant shall complete the formation preparations within one year of receipt of the formal application form; and the period may be extended by three months with the approval of the CIRC if the formation preparations are not completed within the period for a good reason. If it still fails to complete the formation preparations within the extension, the decision of the CIRC to accept the application shall be invalidated automatically. After the completion of the formation preparations, the applicant shall submit the completed application form, along with the following documents, to the CIRC for approval:
(1) A report on formation preparations.
(2) The bylaws of the company to be formed.
(3) The investors of and their amounts of contribution to the company to be formed.
(4) A certification of capital verification issued by a statutory capital verification institution.
(5) A power of attorney issued to the primary person in charge of the company to be formed.
(6) The names, resumes, and certificates of satisfaction of office qualifications of the senior executives of the company to be formed.
(7) Business plans and reinsurance schemes of the company to be formed for the future three years.
(8) The insurance clauses, a list of premium rates, and an explanation on the calculation of liability reserves for the types of insurance provided by the company to be formed within China.
(9) Materials on the business premises and other facilities related to the operations of the company to be formed.
(10) If a branch of a foreign insurance company is to be formed, a letter of guarantee from the head office on its assumption of responsibility for the taxes and debts of the branch.
(11) If an equity joint venture insurance company is to be formed, the contracts on the joint venture.
(12) Other documents as set out by the CIRC.
Article 12 The CIRC shall, within 60 days of receipt of the complete formal application materials for forming a foreign-funded insurance company, decide whether to approve or disapprove the application. In the case of approval, it shall issue a permit for engaging in the insurance business to the applicant; or in the case of disapproval, inform the applicant in writing of the decision with an explanation of the reasons for the disapproval.
If the formation of a foreign-funded insurance company is approved, the applicant shall, on the basis of the permit for engaging in the insurance business, undergo registration with the administrative department for industry and commerce and obtain a business license.
Article 13 A foreign-funded insurance company shall, after its formation, set aside a deposit at the rate of 20% of the total amount of registered capital or working capital, and place the deposit in a bank designated by the CIRC. The deposit may not be used for any purpose other than repayment of debts of the foreign-funded insurance company during its liquidation.
Article 14 The formation of branch offices within China of foreign-funded insurance companies shall be subject to the approval of the CIRC according to the relevant provisions.
Chapter III Scope of Business
Article 15 A foreign-funded insurance company may, according to the scope of business affirmed by the CIRC, engage in all or part of the following types of insurance business:
(1) Property insurance, including but not limited to property loss insurance, liability insurance, and credit insurance.
(2) Personal insurance, including but not limited to life insurance, health insurance, and accidental injury insurance.
A foreign-funded insurance company may engage in large commercial risk insurance and master policy business within the scope as affirmed by the CIRC according to the relevant provisions.
Article 16 A foreign-funded insurance company may not concurrently engage in property insurance and personal insurance.
Article 17 A foreign-funded insurance company may engage in the following reinsurance business for the insurance business as set out in Article 15 of this Regulation:
(1) Outward reinsurance.
(2) Inward reinsurance.
Article 18 The specific scope of business, territories of business, and range of clients of a foreign-funded insurance company shall be subject to the affirmation of the CIRC according to the relevant provisions, and the foreign-funded insurance company may only engage in the insurance business within the affirmed scope, territories, and range.
Chapter IV Supervision and Administration
Article 19 The CIRC shall have the authority to inspect the operations, financial condition, and use of funds of foreign-funded insurance companies, to require foreign-funded insurance companies to provide relevant documents, materials, and written reports during a specified period, and to punish and otherwise legally deal with their violations of laws or regulations.
Foreign-funded insurance companies shall accept the supervisory inspections legally conducted by the CIRC, and honestly provide relevant documents, materials, and written reports, and may not refuse or impede such inspections or conceal any information.
Article 20 A foreign-funded insurer may not conduct any purchase or sale of assets or other transactions with its affiliated enterprises except with the approval of the CIRC:

“Affiliated enterprise” as mentioned in the preceding paragraph means an enterprise which has any of the following relations with a foreign-funded insurance company:

(1) There is a relationship of control in terms of shares or contributions.
(2) Both are controlled by a third party in terms of shares or contributions.
(3) Other affiliations in terms of interests.
Article 21 A branch of a foreign insurance company shall, within three months after the completion of each fiscal year, submit to the CIRC the financial accounting reports of the branch and the head office for the prior year; which shall be made public.
Article 22 If the head office of a foreign insurance company falls under any of the following circumstances, a branch of the foreign insurance company shall, within ten days of the occurrence of the circumstance, file a relevant report with the CIRC in writing:
(1) The name, primary person in charge, or place of registration of the foreign insurance company is modified.
(2) The capitalization of the foreign insurance company is modified.
(3) A shareholder which holds 10% or more of the total capital or shares of the foreign insurance company is modified.
(4) The scope of business of the foreign insurance company is adjusted.
(5) The foreign insurance company is punished by the competent authorities of the country or region where it is located.
(6) The foreign insurance company suffers heavy losses.
(7) The foreign insurance company is divided, merged, or dissolved or is legally abolished or declared bankrupt.
(8) Other circumstances as set out by the CIRC.
Article 23 Where a foreign insurance company is dissolved or is legally abolished or declared bankrupt, the CIRC shall require a branch of the foreign insurance company to cease developing any new business.
Article 24 A foreign-funded insurance company which engages in insurance using foreign exchange shall comply with the provisions of the state on foreign exchange administration.
A foreign-funded insurance company which engages in the insurance business within China shall conduct pricing and settlement in Renminbi except with the approval of the administrative department of foreign exchange of the state.
Article 25 The Chinese versions of the documents, materials, and written reports submitted to the CIRC under this Regulation shall be provided.
Chapter V Termination and Liquidation
Article 26 Where a foreign-funded insurance company is divided or merged or a cause of dissolution as set out in its bylaws appears, it may be dissolved with the approval of the CIRC. Where a foreign-funded insurance company is dissolved, a liquidation group shall be legally formed to conduct liquidation.
A foreign-funded insurance company which engages in life insurance shall not be dissolved except for the division or merger of the foreign-funded insurance company.
Article 27 Where the permit for engaging in the insurance business of a foreign-funded insurance company is revoked by the CIRC for its violation of any law or administrative regulation, it shall be legally abolished, and the CIRC shall legally organize the formation of a liquidation group in a timely manner to conduct liquidation.
Article 28 The liquidation of a foreign-funded insurance company as a result of its dissolution or legal abolition shall be announced three times at a minimum in newspapers within 60 days of the formation of the liquidation group. The content of such announcement shall be subject to the confirmation of the CIRC.
Article 29 Where a foreign-funded insurance company is unable to repay its due debts, it may, with the consent of the CIRC, be legally declared bankrupt by the people's court. Under the organization of the people's court, a liquidation group shall be formed by the CIRC and other relevant departments and personnel for the foreign-funded insurance company declared bankrupt to conduct liquidation.
Article 30 Where a foreign-funded insurance company is dissolved or legally abolished or declared bankrupt, it may not transfer any of its assets out of China before it has repaid its debts.
Chapter VI Legal Liability
Article 31 Any foreign-funded insurance company formed in violation of the provisions of this Regulation or any illegal insurance operation shall be banned by the CIRC; the violator shall be held criminally liable in accordance with the provisions of the Criminal Law on the crime of illegal formation of a financial institution, the crime of illegal business operations, or any other crime; or if the violation is not criminally punishable, any illegal income shall be confiscated by the CIRC, and a fine of not less than the amount but not more than five times the amount of the illegal income shall be imposed by the CIRC on the violator, or if there is no illegal income or the amount of illegal income is less than 200,000 yuan, a fine of not less than 200,000 yuan but not more than 1 million yuan shall be imposed by the CIRC on the violator.
Article 32 Where a foreign-funded insurance company engages in the insurance business beyond the affirmed scope of business, territories of business, or range of clients in violation of the provisions of this Regulation, it shall be held criminally liable in accordance with the provisions of the Criminal Law on the crime of illegal business operations or any other crime; if the violation is not criminally punishable, it shall be ordered by the CIRC to take corrective action and refund the premiums that have been collected, its illegal income shall be confiscated by the CIRC, and a fine of not less than the amount but not more than five times the amount of the illegal income shall be imposed on it, or if there is no illegal income or the amount of illegal income is less than 100,000 yuan, a fine of not less than 100,000 yuan but not more than 500,000 yuan shall be imposed by the CIRC on it; and if it fails to take corrective action during the specified period or there is any serious consequence, it shall be ordered to suspend business for a specified period or its permit for engaging in the insurance business shall be revoked.
Article 33 Where a foreign-funded insurance company falls under any of the following circumstances in violation of the provisions of this Regulation, it shall be ordered by the CIRC to take corrective action, and a fine of not less than 50,000 yuan but not more than 300,000 yuan shall be imposed by the CIRC on it; and if the circumstances are serious, it may be ordered to cease accepting any new transactions or its permit for engaging in the insurance business may be revoked:
(1) It fails to set aside and place a deposit as required or uses the deposit in violation of the relevant provisions.
(2) It transacts with an affiliated enterprise in violation of the relevant provisions.
(3) It fails to make up the deficit of registered capital or working capital as required.
Article 34 Where a foreign-funded insurance company falls under any of the following circumstances in violation of the provisions of this Regulation, it shall be ordered by the CIRC to take corrective action during a specified period; and if it fails to do so during the specified period, a fine of not less than 10,000 yuan but not more than 100,000 yuan shall be imposed by the CIRC on it:
(1) It fails to submit the relevant documents, materials, or written reports as required.
(2) It fails to issue an announcement as required.
Article 35 Where a foreign-funded insurance company falls under any of the following circumstances in violation of the provisions of this Regulation, a fine of not less than 100,000 yuan but not more than 500,000 yuan shall be imposed by the CIRC on it:
(1) It provides any false document, material, or written report.
(2) It refuses or impedes any supervisory inspection legally conducted.
Article 36 Where a foreign-funded insurance company transfers any of its assets out of China in violation of the provisions of this Regulation, it shall be ordered by the CIRC to transfer back such asset into China, and a fine of not less than 20% but not more than the value of the transferred asset .
Article 37 Where a foreign-funded insurance company violates any relevant law or administrative regulation of China or the provisions of this Regulation, the CIRC may disqualify the senior executives of the company for such offices within China during a specified period or for life.
Chapter VII Supplemental Provisions
Article 38 Where this Regulation is silent on the administration of foreign-funded insurance companies, the Insurance Law of the People's Republic of China, other relevant laws and administrative regulations, and other relevant provisions of the state shall apply.
Article 39 This Regulation shall apply, mutatis mutandis, to insurance companies formed in the Chinese mainland by insurance companies from the Hong Kong Special Administrative Region, the Macao Special Administrative Region, or the Taiwan region and operating in the Chinese mainland.
Article 40 This Regulation shall come into force on February 1, 2002.