A clearer road for insurers

China's insurance law (中华人民共和国保险法) has been amended to introduce new provisions on insurance business in China, new rules for insurers, the insured and beneficiaries when dealing with insurance contracts and claims, and renewed guidelines to help the insurance regulator deal with transgressions. There have been important changes relating to the establishment and management of insurance companies, and new burdens have been imposed on insurers who are dealing with property insurance contracts.

Insurance Companies

The existing PRC Insurance Law (中华人民共和国保险法) has been in force since October 2002. The latest revision was adopted on February 28 2009 and becomes effective on October 1. It includes both revised and new provisions for the establishment of insurance companies. Additional requirements for principal shareholders – a term which so far remains undefined – are that they must have the sustainable ability to make profits and have a good reputation, they should have no record of serious material violations of law or regulations in the last three years, and their net assets shall reach at least Rmb200 million (US$29.3 million). Procedures for the establishment of an insurance company, and the documents required, are provided in further detail, as are the conditions and procedures for the establishment of subsidiaries, branches and representative offices. Another new element is that any change of ownership involving shareholders with at least 5% of the shares must be approved by the China Insurance Regulatory Commission (CIRC), up from 10% under the present regime.