Reinsurance: New Area Open for Foreign Investment

By Yongfu Li Chief Representative and Simon Xi Zhang Legal Assistant, Allen & Overy Beijing

The Reinsurance Provisions follow the PRC Insurance Law, which was promulgated on June 30 1995, and was recently amended by the National People's Congress on October 28 2002 (the Insurance Law). The Reinsurance Provisions also relate to the PRC Administration of Foreign-funded Insurance Companies Regulations issued by the State Council on December 12 2001 and effective February 1 2002 (the Foreign Insurance Regulations).

Even though 34 foreign insurance companies have obtained approvals to conduct business in China (and some are up and running),¹ there has only been one purely domestically owned reinsurance company in China, the China Reinsurance Company (China Re). The Insurance Law sets out general provisions about establishing insurance companies in China and the Foreign Insurance Regulations provide for general requirements and guidance for foreign investment in insurance companies in China. However, both focus on life insurance companies and non-life insurance companies. The former lacks specific provisions for the establishment of reinsurance companies generally, while the latter lacks specific provisions for the establishment of foreign-invested reinsurance companies in China. The Reinsurance Provisions make foreign investment in reinsurance companies in China legally possible for the first time.