Circular on Issues Relevant to Revising Certain Foreign Exchange Control Policies Relating to Insurance Business

(Issued by the State Administration of Foreign Exchange on May 23 2006 and effective as of June 1 2006.)

Hui Fa [2006] No.23

Branches and offices of the State Administration of Foreign Exchange of each province, autonomous region and municipality directly under the central government and the Shenzhen, Dalian, Qingdao, Xiamen and Ningbo municipal branches of the State Administration of Foreign Exchange; Chinese-invested designated foreign exchange banks and insurance companies:

With a view to further facilitating insurance company operations and promoting the development of the insurance industry, the State Administration of Foreign Exchange has decided to revise certain foreign exchange control policies relating to insurance business and hereby notifies you concerning relevant issues as follows:

1. The foreign exchange control policies governing insurance companies in China (including Chinese-invested insurance companies, Sino-foreign equity joint venture insurance companies, solely-owned foreign-invested insurance companies and branches of foreign insurance companies) and their (sub-)branches that have received approval to engage in foreign exchange denominated insurance business (Insurance Institutions), that satisfy the conditions of Article 33 or 34 of the Tentative Provisions on Foreign Exchange Control in Insurance Business (Hui Fa [2002] No.95) and that use insurance contracts priced and indemnified in foreign exchange are revised as follows:

(1) The provision on the collection of premiums by Insurance Institutions in foreign exchange is revised such that Insurance Institutions may elect to collect insurance premiums either in renminbi or foreign exchange, provided that they do not collect such premiums in foreign currency cash.

(2) The provisions on Insurance Institutions using their own foreign exchange to pay out indemnities or insurance benefits are revised such that Insurance Institutions may pay the same from their foreign exchange accounts with, or with foreign exchange purchased from, designated foreign exchange banks on the strength of the relevant insurance contracts and claim calculation sheets.

2. Insurance Institutions and insurance asset management companies in China may, in line with their business needs, make currency conversions between different foreign currencies at designated foreign exchange banks to adjust the currencies in which their foreign exchange capital is denominated.

3. The limit on the foreign exchange which an insurance company in China may purchase in connection with the cession of reinsurance abroad is removed. When carrying out the cession overseas of domestic insurance in accordance with the relevant provisions of the China Insurance Regulatory Commission, an Insurance Institution in China that has been approved to engage in reinsurance business denominated in foreign exchange by the State Administration of Foreign Exchange or by a branch thereof may, in line with its actual business requirements, carry out the procedures for payment from its foreign exchange account with, or payment with foreign exchange purchased from, a designated foreign exchange bank on the strength of the reinsurance contract, the reinsurance bill or reinsurance payment list.

4. All Insurance Institutions in China shall complete a Statistical Form for the Foreign Exchange Denominated Insurance Business of an Insurance Company in accordance with the State Administration of Foreign Exchange, Circular on Issues Relevant to the Submission of Insurance-related Foreign Exchange Regulatory Statements (Hui Fa [2003] No.27) and in the "remarks" box of the form describe its payments of foreign exchange in connection with its overseas reinsurance business during the preceding quarter. If foreign exchange was purchased to make payment, details such as the amounts of foreign exchange purchased, the purchase dates, etc. shall be specified.

5. This Circular shall be effective as of June 1 2006. In the event of a conflict between this Circular and existing provisions, this Circular shall prevail. The State Administration of Foreign Exchange and China Insurance Regulatory Commission, Circular on Issues Relevant to Administration of the Sale and Payment of Foreign Exchange in Connection with the Overseas Cession of Reinsurance (Hui Fa [2003] No.75) is repealed simultaneously.

Upon receipt of this Circular, branches of the State Administration of Foreign Exchange shall transmit the same to the insurance companies and foreign-invested banks in their jurisdictions as soon as possible. Chinese-invested designated foreign exchange banks shall transmit the same to their branches and sub-branches as soon as possible. If you encounter any problems in the implementation hereof, you are asked to report the same to the State Administration of Foreign Exchange in a timely manner.

Contact tel.: 010-68402381

Fax tel.: 010-68402272