Administration of Insurance Companies Provisions

Article 2: The China Insurance Regulatory Commission (hereafter, CIRC) shall carry out regulation over insurance companies in accordance with the authorization of the law and the State Council.

Regional offices of the CIRC shall exercise their functions and powers within the scope of the CIRC's authorization.

Article 3: For the purposes of these Provisions, the term "insurance companies" means commercial insurance companies that are established with the approval of insurance regulatory authorities and registered in accordance with the law.

For the purposes of these Provisions, the term "branches and sub-branches of insurance companies" means business organizations and sales service organizations established by insurance companies in accordance with the law, including branches, central sub-branches, sub-branches, business centres and sales service centres.

For the purposes of these Provisions, the term "insurance organizations" means insurance companies and their branches and sub-branches.

PART TWO: INSURANCE ORGANIZATIONS

Section One: Establishment of Organizations

Article 4: The establishment of insurance organizations shall be subject to the approval of the CIRC.

Without the approval of the CIRC, no work unit or individual may directly engage in, or engage in in any disguised form, commercial insurance business within the territory of the People's Republic of China.

Article 5: The following principles shall be complied with when establishing insurance companies:

(1) compliance with laws and administrative regulations;

(2) compliance with state macroeconomic policies and strategies for the development of the insurance industry; and

(3) benefits for the fair competition and healthy development of the insurance industry.

Article 6: The following conditions shall be met for the establishment of an insurance company:

(1) it has qualified investors and a rational shareholding structure;

(2) its articles of association conform to the stipulations of the Insurance Law and the Company Law;

(3) it has minimum registered capital of
Rmb200 million, which shall be actual paid-in money capital;

(4) its senior management personnel shall have the qualifications prescribed by the CIRC;

(5) it has a sound organizational structure and management system; and

(6) it has a place of business and office equipment commensurate with its business development.

Article 7: To establish an insurance company, the applicant shall submit to the CIRC a written application together with the following materials in triplicate:

(1) a letter of application for establishment, which shall specify the name, registered capital, business scope, etc. of the company to be established;

(2) a feasibility study report, which shall include business development plans, draft articles of association of the company, business management strategies, etc.;

(3) a plan for preparation for establishment;

(4) the investor's share purchase agreement and proof showing that its board of directors or competent authority agrees to the investment;

(5) the investor's business licence or other background materials, and the previous year's balance sheet and profit and loss statement audited by a certified public accountant;

(6) a list of the responsible persons for the establishment preparation team approved by the investor, and the proposed chairman of the board of directors and general manager of the company as well as certificates of acknowledgement by such proposed persons themselves; and

(7) other materials required by the CIRC.

Article 8: The CIRC shall conduct an examination of the application for the establishment of an insurance company. Within six months from the date on which it receives the complete application materials, the CIRC shall render a decision on whether or not to approve the establishment preparation. If it does not approve, a written notification shall be sent to the applicant specifying the reasons therefor.

Article 9: During the period in which the CIRC is conducting an examination of the application for the establishment of an insurance company, the CIRC shall provide education to the investor reminding it of the risks of investing in the insurance industry.

The CIRC shall obtain from the proposed chairman of the board of directors and the general manager working ideas regarding the proposed company's market development strategies, business development plans, internal control system structure, etc. Such information shall be referred to when deciding whether or not to approve the establishment preparation.

Article 10: If the CIRC approves the establishment preparation of an insurance company, the applicant shall complete the establishment preparation work within one year. Where the establishment preparation work cannot be completed within the stipulated period, the establishment preparation period may, with appropriate reasons and with approval of the CIRC, be extended by three months. If the establishment preparation work still is not completed within the extended period, the original establishment preparation approval documentation issued by the CIRC shall automatically become void.

Establishment preparation organizations are prohibited from engaging in any insurance business activities.

In principle, there shall not be any change of investor during the establishment preparation period. Where there has been an unapproved change of investor, the original establishment preparation approval documentation shall automatically become void.

Article 11: After completing the establishment preparation work, the applicant shall apply to the CIRC to commerce business and the following materials shall be submitted in triplicate:

(1) a letter of application for commencement of business;

(2) meeting minutes of the founding assembly;

(3) articles of association;

(4) name of shareholders and their shareholding ratios, certificate of capital verification issued by a capital verification entity with good creditworthiness, and photocopy of the original capital deposit slip;

(5) business licences or other background information of the shareholders, and their balance sheets and profit and loss statements for the previous fiscal year;

(6) résumés and relevant supporting materials of the proposed senior management personnel of the company, department set-up and personnel structure of the company, and résumés and relevant supporting materials of the actuary of the company;

(7) documentation evidencing the ownership or the use rights to the business premises;

(8) a three-year business plan and reinsurance plan;

(9) a plan for proposed insurance product categories; and

(10) a report regarding disposition of computer equipment and construction of computer network systems.

Article 12: Within 60 days from the date on which it receives the complete set of application materials for the commencement of business, the CIRC shall render a decision on whether or not to approve the commencement of business. If it approves, an insurance business permit shall be issued. If it does not approve, a written notification shall be sent to the applicant specifying the reasons therefor.

The insurance company that has been approved to commence business shall, on the strength of the approval documents and insurance permit, complete registration procedures with the administration for industry and commerce and obtain a business licence before commencing business.

Article 13: Insurance companies may, according to their business development requirements, apply to establish branches and sub-branches.

Insurance companies shall establish branches for the launch of business in provinces, autonomous regions or municipalities directly under the central government other than its place of domicile. Insurance companies may, according to their actual circumstances, apply to establish central sub-branches, sub-branches, business centres or sales service centres.

Where the CIRC has other stipulations on the establishment and administration of sales service centres of insurance companies, such stipulations shall prevail.

Article 14: Insurance companies that have been established with the minimum registered capital requirement as stipulated in Article 6(3) hereof shall, when establishing the first branch in each province, autonomous region or municipality directly under the central government other than their places of domicile, increase their registered capital by not less than Rmb20 million.

When applying to establish branches, insurance companies whose registered capital has already reached the amount after the increase as stipulated in the preceding paragraph need not further increase their registered capital correspondingly.

When insurance companies with registered capital of Rmb500 million establish branches under circumstances of sufficient solvency, they need not increase their registered capital.

Article 15: To apply for establishment of branches or sub-branches, foreign-invested insurance companies shall fulfil the following requirements:

(1) their solvency levels comply with the relevant requirements of the CIRC;

(2) they have a sound internal control system and no penalty record, and in the case of over two years of business operations, have no penalty record in the most recent two years; and

(3) they have senior management personnel for the branches or sub-branches possessing qualifications that comply with the qualification requirements of the CIRC.

Article 16: The application to establish branches or sub-branches shall be made by the foreign-invested insurance company to the CIRC, and the following materials shall be submitted in triplicate:

(1) an application letter for establishment;

(2) an audited solvency report for the end of the preceding year and for the end of the most recent quarter;

(3) three-year business development plans and market analyses for the organization to be established; and

(4) a résumé and related supporting materials of the person responsible for the establishment preparation for the organization to be established.

Article 17: The CIRC shall examine the application to establish branches or sub-branches, and shall, within 20 days of the receipt of the complete set of application materials, render a decision on whether or not to approve the preparation for establishment. If the application is not approved, the CIRC shall provide a written notification to the applicant specifying the reasons therefor.

Following the approval of the application, the applicant shall complete the establishment for the branch or sub-branch within six months. If the preparation work is not completed within the stipulated time period for acceptable reasons, such preparatory establishment period may be extended for another three months upon the approval of the CIRC. If the preparatory establishment work is not completed within the extended time period, the initial approval documentation made by the CIRC shall automatically become void.

The establishment preparation organization shall not engage in any insurance business activities.

Article 18: Upon the completion of the establishment preparation work of the branch or sub-branch, the applicant shall apply to the CIRC to commence business, and shall submit the following materials in triplicate:

(1) an application letter for commencement of business;

(2) a report on the completion of the establishment preparation work;

(3) a résumé and related supporting materials of the proposed senior management personnel; and

(4) relevant documentation evidencing the ownership or use rights of the office premises, information on the disposition of computer equipment and construction of computer network systems, and information concerning the internal organizational structure, personnel and so on, of the organization proposed to be established.

Article 19: The CIRC shall, within 20 days of the receipt of the complete set of application materials for business commencement of the established branch or sub-branch, render a decision on whether or not to approve the application. If the application is approved, an insurance business permit for branches and sub-branches shall be issued. If the application is not approved, the CIRC shall provide a written notification to the applicant specifying the reasons therefor.

The branch or sub-branch of the insurance company that has been approved to commence business shall, on the strength of the approval documents and insurance permit, complete registration procedures with the administration for industry and commerce and obtain a business licence before commencing business.

Article 20: The examination and administration of the qualifications of the senior management personnel of insurance organizations and their branches and sub-branches are subject to the relevant provisions of the CIRC.

Article 21: The establishment of representative offices in China by insurance companies shall be subject to the verification of the CIRC. Representative offices shall not engage in any insurance business activities.

Article 22: The establishment of business organizations or representative offices outside China by insurance companies shall be subject to the approval of the CIRC.

Section Two: Changes Involved in Organizations

Article 23: An insurance company shall report to the CIRC for approval with regard to the following changes:

(1) change of organizational format;

(2) change in registered capital;

(3) division or merger;

(4) change in investors, or shareholders holding 10% or more in the company; or

(5) cancellation of branches or sub-branches.

Article 24: An insurance company shall report to the CIRC for verification with regard to the following changes:

(1) change of the company name;

(2) amendments to the articles of association;

(3) adjustment to the scope of business; or

(4) change of domiciles.

Article 25: An insurance company shall report to the CIRC for the record with regard to the following changes:

(1) change in shareholders holding less than 10% in the company, with the exception of changes in shareholders of listed insurance companies; or

(2) change of business premises of branches or sub-branches.

Article 26: An insurance organization shall, within 15 days after the occurrence of the following changes, submit a written report to the CIRC:

(1) change of names of shareholders of the insurance company, with the exception of shareholders of listed insurance companies; or

(2) merger or change of names of insurance company branches or sub-branches.

Article 27: When cancelling a branch or sub-branch, an insurance company shall provide an explanation of the reason therefor to the CIRC and submit a follow-up plan for handling of the business of the branch or sub-branch.

Insurance companies that merge or cancel their branches or sub-branches shall issue a public notice thereof and provide written notification to the related proposers, the insured or beneficiaries with detailed information regarding payment of insurance premiums, drawing of insurance funds and other matters.

Where an insurance company cancels its branch or sub-branch, the insurance permit of the branch or sub-branch shall automatically become void from the day of approval and shall be handed in within 15 days.

Article 28: Where there are changes in the items recorded in the insurance permit, the insurance organization shall, within one month from the day of obtaining the approval or verification, or of record filing or submission of a written report, take the relevant documentation and the insurance permit to the issuing authority to change the permit.

Section Three: Insurance Permits

Article 29: For the purposes of these Provisions, the term "insurance permit" means the permit to engage in the insurance business of insurance companies or their branches or sub-branches.

The insurance permit is a legal documentation issued by the CIRC in accordance with the law, which permits insurance organizations to engage in the insurance business, and is a certificate for insurance organizations to engage in the insurance business in accordance with the law.

Article 30: The CIRC shall uniformly design, print and distribute, and may hold, take over or revoke, insurance permits in accordance with the law.

Insurance organizations shall not forge, alter, lease, lend, or transfer insurance permits.

Article 31: Insurance organizations shall place their insurance permits in a prominent position on the business premises ready for inspection.

Article 32: If an insurance permit is lost, a declaration shall be published in a newspaper designated by the CIRC stating that such permit is void within 10 days from the day of discovering such loss; and at the same time, an explanation thereof shall be given to the issuing authority and a new permit applied for.

Section Four: Termination and Liquidation

Article 33: If an insurance company is dissolved, a liquidation committee shall be established. The liquidation work shall be supervised and guided by the CIRC.

If an insurance company is shut down in accordance with the law, a liquidation committee consisting of shareholders, relevant departments and relevant professionals shall be organized by the CIRC in a timely manner.

If an insurance company is declared bankrupt in accordance with the law, a liquidation committee shall be organized by the people's court in accordance with the law.

Article 34: The liquidation committee shall inform the creditors within 10 days from its establishment, and shall, within 60 days, publish a public notice at least three times in a newspaper designated by the CIRC. The contents of such public notice shall be verified by the CIRC.

The liquidation committee shall appoint an accounting firm and a law firm with good creditworthiness to appraise the claims, debts and assets of the company.

Article 35: The dissolution of an insurance company according to its articles of association or resolution of the shareholders' meeting shall be subject to the approval of the CIRC, and the following materials shall be submitted in triplicate:

(1) a letter of application for dissolution;

(2) a resolution of the shareholders' meeting;

(3) the liquidation committee and the person in charge of it;

(4) the liquidation procedure;

(5) the arrangement plan for claims and debts;

(6) asset distribution and disposal plans; and

(7) other materials as required by the CIRC.

Article 36: If an insurance company is dissolved, or shut down in accordance with the law, it shall immediately cease accepting new business and hand in its insurance permit.

Article 37: If an insurance company is dissolved, or shut down in accordance with the law, its assets shall be disposed of through public auctions, transfer agreements or other methods ratified by the CIRC.

Article 38: If an insurance company is dissolved, or shut down or declared bankrupt in accordance with the law, the plan for the transfer of insurance contracts shall be reported to the CIRC for approval.

Article 39: If an insurance company is dissolved, its shareholders shall not distribute the company's assets or obtain any benefits from the company before the liquidation of the liability in insurance contracts is completed.

Article 40: If an insurance company is dissolved and, during the liquidation proceedings, its assets are found to be unable to cover its debts, the company shall apply to be declared bankrupt. The liquidation of its property and handling of claims and debts shall be carried out in accordance with statutory bankruptcy proceedings.

Section Five: Investment in Insurance Companies

Article 41: Enterprise legal persons, or other organizations permitted by laws and administrative regulations, may invest in or make an equity participation in insurance companies.

Article 42: Enterprise legal persons that invest in or make an equity participation in insurance companies shall meet the following conditions:

(1) compliance with the stipulations of laws and administrative regulations;

(2) the investment funds come from a lawful source and the enterprise's business is doing well; and

(3) other conditions stipulated by the CIRC according to the principle of prudential regulation.

Article 43: When investing in insurance companies, except for insurance holding companies or insurance companies approved by the CIRC, the shareholding of a single enterprise legal person or another organization (including an affiliated party) shall not exceed 20% of the total shares of the insurance company.

Article 44: An insurance company shall provide a written report to the CIRC regarding any affiliated relationships between the shareholders of the insurance company.

Article 45: Offshore financial institutions that meet the conditions stipulated in Article 42 hereof may invest in or make an equity participation in insurance companies, subject to the approval of the CIRC. The aggregate equity participation ratio of all offshore shareholders shall be less than 25% of the total shares of the insurance company. Relevant stipulations for the administration of foreign-invested insurance companies shall be applicable where the total investment ratio of all offshore shareholders is 25% or more of the total shares of the insurance company.

The stipulations of the preceding paragraph do not apply to offshore shareholders investing in listed insurance companies.

Article 46: Insurance companies that issue shares to the public and list in China shall comply with Article 43 hereof regarding restrictions on investment ratios of shareholders.

PART THREE: INSURANCE BUSINESS OPERATIONS

Article 47: After obtaining confirmation from the CIRC, a property insurance company may engage in all or some of the following insurance businesses:

(1) property damage insurance;

(2) liability insurance;

(3) mandatory liability insurance;

(4) credit insurance and guarantee insurance;

(5) agricultural insurance;

(6) other property insurance business;

(7) short-term medical insurance and accident insurance; and

(8) reinsurance business of the abovementioned insurance businesses.

Article 48: After obtaining confirmation from the CIRC, a life insurance company may engage in all or some of the following insurance businesses:

(1) accident insurance;

(2) medical insurance;

(3) traditional life insurance;

(4) new categories of life insurance products;

(5) traditional pension insurance;

(6) new categories of pension insurance products;

(7) other personal insurance products; and

(8) reinsurance business of the abovementioned insurance businesses.

Article 49: Where an insurance company applies for expansion of its business scope, registered capital, solvency, etc., it shall meet the relevant requirements of the CIRC.

Article 50: When conducting foreign exchange insurance business, an insurance organization shall comply with the relevant provisions on administration of foreign exchange insurance business of the CIRC and the State Administration of Foreign Exchange.

Article 51: Except for the circumstances stipulated in Article 52 hereof, branches or sub-branches of insurance companies shall not conduct insurance business outside their province, autonomous region or municipality directly under the central government.

Article 52: If an insurance organization participates in co-insurance, engages in large-scale commercial insurance or master policy insurance business, or assumes insurance business outside its province, autonomous region or municipality directly under the central government through the internet or other methods, the relevant provisions of the CIRC shall be complied with.

Article 53: Insurance companies shall specify the retained premium of their insurance business in accordance with the law, and shall specify the retained liability for the loss that may be caused by each risky unit. Any proportion that exceeds the amount stipulated by law shall be ceded for reinsurance.

Article 54: An insurance company needing to cede reinsurance business shall, under the same conditions, give priority to insurance companies inside China.

Article 55: Insurance organizations shall not force, or force in any disguised manner, proposers to purchase insurance policies.

Article 56: Insurance organizations shall not appoint illegal insurance agents to develop their business, accept insurance business introduced by illegal insurance brokers, or pay processing fees, commission or other like fees to illegal insurance agents or insurance brokers.

Article 57: Insurance organizations shall not defame other insurance organizations by fabricating and spreading untruths as facts.

Article 58: Insurance organizations shall not persuade or induce the proposer or insured to terminate their insurance contracts with other insurance organizations.

Article 59: Insurance organizations shall not make use of governmental and other subordinate departments or monopolistic enterprises or organizations to exclude or impede other insurance organizations from developing insurance business.

Article 60: Insurance organizations shall not provide or promise to provide insurance premium rebates or other benefits that are against laws or regulations to insurance proposers, the insured, beneficiaries or interested parties.

Article 61: Insurance organizations shall establish special customer service departments or enquiry and complaint departments, and publicize the telephone number for enquiry and complaints to the public.

Insurance complaints by proposers, the insured or beneficiaries shall be conscientiously handled, and the opinions regarding the handling of such complaints shall be notified to the complainants in a timely manner.

Article 62: The contents of an insurance organization's publicity materials for insurance business shall be objective, complete and true, and shall contain the insurance organization's name and address, and the telephone number for enquiry and complaints.

Article 63: Insurance advertisements or business publicity materials shall not predict the company's profit or indeterminate policy benefits such as policy dividends, return from differences in interest rates, etc.

Insurance organizations shall not take advantage of advertisements or other means to make misleading publicity for the contents of its insurance clauses, service quality, etc.

Article 64: Insurance organizations shall use clear methods to make special mention in insurance contracts to clauses regarding exclusion or exemption of their liability, policy surrender and other fee deduction, cash value, cooling-off period, and other matters.

Insurance organizations shall not unilaterally compare their insurance clauses and insurance premium rates with similar insurance clauses and insurance premium rates of other insurance companies, or the deposit interest rates of financial organizations.

Article 65: Insurance organizations shall supervise and administer the business agency activities of their insurance agents, and where the agents' activities are found to violate laws or regulations, such activities shall be immediately stopped or rectified.

Insurance organizations shall be liable in accordance with the law for behaviours damaging the interests of the insured such as false representations, misleading conduct and others made by their insurance agents during business development.

Article 66: Insurance companies shall establish relevant systems for the control and management of affiliated transactions. Material affiliated transactions of insurance companies shall be reported to the CIRC within 15 days after their occurrence.

Affiliated transactions in the preceding paragraph shall refer to the following transactions between an insurance company and its affiliated parties:

(1) outward or inward reinsurance business;

(2) asset management, security and agency business; and

(3) sale or purchase of fixed assets, or transfer of claims or debts.

Enterprises having one of the following relationships with an insurance company shall be deemed to have an affiliated relationship with the insurance company:

(1) a controlling relationship with respect to shares or capital contributions;

(2) being controlled by the same third party with respect to shares or capital contributions; and

(3) being directly controlled by the insurance company's senior management personnel or their close family members.

The insurance company's senior management personnel or their close family members shall be deemed as having an affiliated relationship with the insurance company.

Article 67: Insurance companies shall establish sound corporate governance structures, strengthen internal management and establish strict internal control systems.

Article 68: Insurance companies intending to list shall obtain regulatory opinions issued by the CIRC.

PART FOUR: INSURANCE CLAUSES AND INSURANCE PREMIUM RATES

Article 69: Insurance clauses and insurance premium rates used by insurance companies shall be reported to the CIRC for examination and approval or for record filing in accordance with the law.

Article 70: Insurance clauses and insurance premium rates of the following insurance categories shall be reported to the CIRC for examination and approval:

(1) insurance categories for mandatory insurance as prescribed by law;

(2) newly developed life insurance categories; and

(3) other insurance categories that are classified by the CIRC as having a bearing on the public interest.

The catalogue for insurance products that shall be examined and approved shall be specified and adjusted by the CIRC.

Article 71: Except for the stipulations in the preceding article, insurance clauses and insurance premium rates for other insurance categories used by insurance companies shall be reported to the CIRC for record filing.

Article 72: In carrying out the examination and approval or record filing process for insurance clauses and insurance premium rates, the CIRC shall abide by the principles of protecting public interest and preventing unfair competition.

In any of the following circumstances, the CIRC may require the insurance company to amend the insurance clauses and insurance premium rates or order the insurance company to cease using such clauses and rates:

(1) the insurance clauses or premium rates are in violation of laws, administrative regulations or the stipulations of the CIRC;

(2) the insurance clauses or premium rates are in violation of relevant state financial policies;

(3) the insurance clauses or premium rates are harmful to the public interest;

(4) the contents of the insurance clauses or premium rates are manifestly unfair or form a price monopoly, or violate the lawful rights and interests of the insurance proposers, the insured or the beneficiaries;

(5) the clause design, or the set premium rate or the pre-determined interest rate is inappropriate, which may affect the insurance company's solvency; or

(6) other issues specified by the CIRC according to the principle of prudential regulation.

Article 73: If an amendment is made to insurance clauses or premium rates that have already been approved or filed for the record, such clauses or premium rates shall be reported anew for examination and approval or record filing.

When concluding a specific insurance contract, the insurance company may enter into additional agreements with the other party on certain specific issues, which, however, shall not include the circumstances referred to in Items (1) to (6) of the second paragraph in the preceding article.

Article 74: Pricing factors such as pre-determined policy interest rates of long-term personal insurance clauses proposed by an insurance company shall meet the relevant CIRC stipulations.

Article 75: Insurance companies shall actively develop and launch insurance products that meet the demands of the society, and endeavour to carry out products and services innovation.

The language used in insurance clauses and insurance premium rates of insurance companies shall be common, unambiguous and easy to understand.

Article 76: Insurance industry associations may issue standard samples of property insurance or personal insurance clauses.

Insurance industry associations may publish referential insurance premium rates, according to the actual circumstances.

PART FIVE: INSURANCE FUNDS AND SOLVENCY OF INSURANCE COMPANIES

Article 77: Insurance companies shall make contributions towards guarantee funds in accordance with the law. Except for payment of debts during liquidation proceedings in accordance with the law, insurance companies shall not use or dispose of such guarantee funds without authorization.

Article 78: Insurance companies shall make contributions towards insurance security funds in accordance with the law. Insurance security funds shall, in accordance with the relevant stipulations of the CIRC, be centrally managed and usage of such funds shall be comprehensively planned.

Article 79: Insurance companies shall, in accordance with the relevant stipulations of the CIRC, make contributions towards various insurance liability reserve funds, which shall be true and sufficient.

Article 80: The utilization of insurance funds is limited to:

(1) bank deposits;

(2) sale and purchase of government bonds;

(3) sale and purchase of financial bonds;

(4) sale and purchase of enterprise bonds;

(5) transactions of securities investment funds; and

(6) other utilization of insurance funds prescribed by the State Council.

The specific methods, specific proportion of the products, as well as the recognized minimum credit rating, in which insurance companies may utilize insurance funds shall meet the relevant stipulations of the CIRC.

Article 81: The utilization of funds of insurance companies outside China shall meet the relevant state stipulations.

Article 82: Insurance companies may establish insurance asset management companies and entrust such insurance asset management companies to utilize the insurance funds.

Article 83: Insurance companies shall, according to the principles of protecting the interests of the insured and securing the solvency of the company, operate stably and ensure that their solvency levels are not less than the minimum solvency level at any time.

Article 84: The actual solvency level of an insurance company is the difference between its recognized assets and its recognized liabilities.

The determination, measurement and reporting of recognized assets and liabilities shall meet the relevant stipulations of the CIRC.

Article 85: The minimum solvency level of insurance companies shall be subject to the stipulations and adjustments by the CIRC.

Article 86: Where an insurance company's actual solvency level is lower than the minimum solvency level, effective measures shall be taken by the insurance company to improve its solvency situation. The relevant rectification plan, specific measures undertaken, results after rectification and other information shall be reported to the CIRC.

Article 87: The solvency adequacy ratio of an insurance company is the actual solvency level divided by the minimum solvency level. If the solvency adequacy ratio of an insurance company is less than 100%, the company may be listed by the CIRC as one that requires special regulation, and the following regulatory measures may be taken according to specific circumstances:

(1) If the solvency adequacy ratio of an insurance company is above 70%, the CIRC may require the company to submit a rectification plan and meet the minimum solvency level requirement within the prescribed period of time. If such requirement is not met within such prescribed period of time, regulatory measures such as requiring the company to increase its capital, ordering the ceding of reinsurance, restricting the business scope, restricting the distribution of dividends to shareholders, restricting the purchase of fixed assets, restricting the scale of operating expenses, and restricting the establishment of new branches or sub-branches may be taken until the minimum solvency level requirement is met.

(2) If the solvency adequacy ratio of an insurance company is between 30% and 70%, in addition to the measures stipulated in the preceding paragraph, the CIRC may also take other regulatory measures such as ordering the company to auction the non-performing assets, transfer the insurance business, restrict the salaries and corporate expenditure levels of senior management personnel, restrict the commercial advertisements of the company, adjust the utilization of funds, and stop the launch of new business.

(3) If the solvency sufficiency ratio of an insurance company is less than 30%, in addition to the measures stipulated in the preceding paragraph, the CIRC may, in accordance with the law, take the said insurance company into receivership.

PART SIX: SUPERVISION AND INSPECTION

Article 88: The CIRC's regulation over insurance companies shall follow the principle of the combination of solvency regulation and market behaviour regulation.

Insurance companies shall, in accordance with the law, accept the CIRC's regulation.

Article 89: The CIRC's regulation over insurance companies shall be carried out using the combined method of on-site regulation and off-site regulation.

Article 90: In any of the following circumstances, an insurance organization may be listed by the CIRC as one that requires key inspection:

(1) it has seriously violated laws or regulations;

(2) its solvency is inadequate;

(3) its financial circumstances are abnormal;

(4) it has provided false reports, statements, documentation or materials; or

(5) other circumstances for which the CIRC deems that key inspection is required.

Article 91: On-site inspections of insurance organizations carried out by the CIRC shall include all or part of the following matters:

(1) whether or not the examination and approval procedure or record filing procedure for establishment of organizations or changes thereof is complete;

(2) whether or not the contents of the application materials are in conformity with the actual circumstances;

(3) whether or not capital and various reserve funds are true and sufficient;

(4) whether or not the solvency is adequate;

(5) whether or not the utilization of funds is lawful;

(6) whether or not the business operations and financial situation are sound, and reports and statements are complete and true;

(7) whether or not it has, in accordance with provisions, reported for examination and approval or for record filing insurance clauses and premium rates used;

(8) whether or not business dealings with insurance intermediaries are in accordance with the laws and regulations;

(9) whether or not the procedure for the appointment or change of senior management personnel is complete;

(10) whether or not matters for which subsequent reports are required have been reported in a timely manner; and

(11) other matters for which the CIRC deems that inspection is necessary.

Article 92: Insurance organizations shall cooperate with the on-site inspections carried out by the CIRC and provide relevant documentation and materials as required by the CIRC.

Article 93: When carrying out on-site inspections, there shall be no less than two inspectors and they shall present the relevant documentation and inspection notification letter. If intermediary organizations such as accounting firms are commissioned by the CIRC to carry out inspections on its behalf, a written power of attorney is required.

Article 94: Insurance organizations shall, in accordance with relevant stipulations, submit to the CIRC their business operation reports, actuarial reports, financial accounting statements, solvency reports and relevant regulatory reports and statements in a timely manner.

Article 95: Various statements and reports submitted by insurance organizations to the CIRC shall be complete, true and accurate.

Article 96: Business operation reports, financial accounting statements, solvency reports and relevant statements of insurance companies shall be signed by the company's legal representative or general manager, and the annual financial statements and solvency reports shall also be audited by certified public accountants. The actuarial reports of insurance companies shall be signed by the actuarial personnel recognized by the CIRC. Reports and statements of branches and sub-branches of insurance companies shall be signed by the person in charge of the organization and shall bear the seal of the organization.

Article 97: Important resolutions made by the shareholders' or board of directors meetings of insurance companies shall be reported to the CIRC within 30 days of the making of such resolutions.

Article 98: The CIRC may, for the sake of its regulatory duties, have conversations regarding regulation with or question senior management personnel of insurance companies, and require clarification of material events concerning insurance business activities and risk management.

Article 99: If an insurance organization or its personnel violate these Provisions, the CIRC shall give warnings, order rectification or give administrative penalties in accordance with relevant laws and administrative regulations. If a crime is suspected, the case shall be transferred to judicial authorities to pursue criminal liability.

PART SEVEN: SUPPLEMENTARY PROVISIONS

Article 100: These Provisions shall be applicable to foreign-invested insurance companies and reinsurance companies. Where laws or administrative regulations or the CIRC have different stipulations, such stipulations shall prevail.

Article 101: These Provisions shall, mutatis mutandis, apply to export credit insurance and other public-policy-oriented insurance companies before relevant state stipulations are promulgated.

Article 102: Various statements and materials submitted by insurance companies to the CIRC shall be written in the Chinese language. If the original documents are made in foreign languages, Chinese language translations shall be provided. Where there is a discrepancy between the Chinese language version and the foreign language version, the Chinese language version shall prevail.

Article 103: Except for expressions in terms of year and month, the reference to relevant time periods in these Provisions shall be calculated as working days and shall not include statutory holidays.

Article 104: These Provisions shall be interpreted by the CIRC.

Article 105: These Provisions shall come into effect as of June 15 2004. The Administration of Insurance Companies Provisions (Bao Jian Fa [2000] No.2) promulgated by the CIRC on January 3 2000 and the Amending Relevant Provisions of the«Administration of Insurance Companies Provisions» Decision (Bao Jian Hui Ling [2002] No.3) issued by the CIRC on March 15 2002 shall simultaneously be repealed.

1 Translation provided by Boss & Young, Attorneys at Law.