Measures for the Administration of Insurance Group Companies (Trial Implementation)

(Issued by the China Insurance Regulatory Commission on, and effective as of, March 12 2010.)

Bao Jian Fa [2010] No.29

Part One: General provisions

Article 1: These Measures have been formulated pursuant to the PRC Insurance Law (Insurance Law), the PRC Company Law (Company Law) and related laws and administrative regulations in order to strengthen the regulation of insurance group companies, effectively guard against the business risks of insurance groups and promote the healthy development of the financial/insurance sector.

Article 2: The China Insurance Regulatory Commission (the CIRC) exercises oversight over insurance group companies in accordance with laws and administrative regulations and based on the authority delegated to it by the State Council.

Article 3: For the purposes of these Measures, the term “insurance group company” means a company established with the approval of the CIRC, that is lawfully registered, has the words “insurance group” or “insurance holding” in its name and exercises control or joint control and a material influence over the other members in the insurance group.

The term “insurance group” means a cluster of enterprises, the main business of which is insurance business, composed of an insurance group company and the companies subject to its control or joint control and material influence, and in which there are two or more subsidiaries that, in addition to the insurance group company, are insurance companies.

The term “members of an (the) insurance group” means the insurance group company and the companies subject to its control or joint control and material influence.

Part Two: Establishment

Article 4: To establish an insurance group company, the following conditions shall be satisfied:

(1) having qualified investors, a rational equity structure and the investors controlling 50% or more of the equity in a total of two or more insurance companies;

(2) among the insurance companies already controlled by the investors, at least one has engaged in the insurance business for at least six years, has been profitable for the last three years in succession, has net assets of not less than Rmb1 billion and total assets of not less than Rmb10 billion;

the insurance companies already controlled by the investors have a solvency that satisfies CIRC provisions, have a relatively sound corporate governance structure and internal control system and have not committed a major violation of laws or regulations during the most recent three years;

(3) having minimum registered capital of not less than Rmb2 billion;

(4) having directors, supervisors and senior management personnel whose qualifications satisfy CIRC provisions;

(5) having a sound governance structure and organisational structure, and effective risk management and internal control management systems;

(6) having business premises and office equipment appropriate for the development of its business; and

(7) other conditions as specified in laws and administrative regulations and by the CIRC.

Where a takeover or re-organisation is carried out in order to dispose of risks, the foregoing conditions may, with the approval of the CIRC, be suitably relaxed.

Article 5: An insurance group company may be established in either of the following manners:

(1) the shareholders of the insurance companies, as promoters, use their equity in the insurance companies and cash as capital contributions in establishing the insurance group company; the total amount of the capital contributions made in cash may not be less than 30% of the insurance group company's registered capital; or

(2) an insurance company is converted into, and its name changed into that of, an insurance group company, the insurance group company contributes capital in the form of cash to establish insurance subsidiaries, and insurance business of the original insurance company is transferred in accordance with the law to the insurance subsidiaries.

Article 6: When an application is made to establish an insurance group company in the manner set forth in Item (1) of Article 5, the sponsors shall submit the following materials to the CIRC in triplicate:

(1) a written application for establishment, stating the name, registered capital, scope of business, etc. of the proposed company;

(2) a feasibility report that includes the manner of establishment, the corporate governance and organisational framework, development strategy, risk management and internal control systems, an assessment of the solvency of the insurance subsidiaries before and after integration, etc.;

(3) the preparatory scheme, including the equity structures of the insurance group company and its subsidiaries, the master plan and operational procedure for smoothing out the equity relationships, the names of the subsidiaries and the types of business they engage in, etc.;

(4) the insurance group company's articles of association;

(5) the audited financial accounting reports and solvency reports of the insurance companies;

(6) the share subscription agreement of the investors, documentation evidencing that the boards of directors or relevant authorities of the investors consent to their making the investments, the business licences of, or other background information on, the investors and the audited financial accounting reports of the investors;

(7) the resolution of the founding meeting, or, in the absence of a founding meeting resolution, the documents or resolutions of all of the shareholders indicating their consent to apply to open for business;

(8) the investment certificates issued by a capital verification firm that is creditworthy, photocopies of the original receipts evidencing the crediting of the capital to the account, and reports of the appraisal of the insurance companies' equity;

(9) the résumés of the person in charge of the preparatory committee and of the proposed directors, supervisors and senior management personnel and relevant supporting documentation;

(10) the document evidencing ownership of, or the right to use, the place of business;

(11) the medium- and long-term development strategies and plans, business operation plan, plan for investing in third parties and major systems such as the capital and financial management system, risk management system and internal control system;

(12) a report on the establishment of the information system;

(13) the notice of pre-approval of the company name;

(14) a legal opinion issued by a law firm; and

(15) other materials that the CIRC specifies be submitted.

Article 7: When an application is made to establish an insurance group company in the manner set forth in Item (2) of Article 5, the promoters shall submit the following materials to the CIRC in triplicate:

(1) a written application for the change of name, stating the new name, registered capital, scope of business, etc. of the company whose name is being changed;

(2) a feasibility report that includes the manner in which the name is to be changed, the corporate governance and organisational framework, development strategy, risk management and internal control systems, an assessment of the solvency of the insurance subsidiaries before and after the change of name, etc.;

(3) the scheme for the change of name, including the equity structures of the insurance group company and its subsidiaries, the master plan and operational procedure for smoothing out the equity relationships, the names of the subsidiaries and the types of business they engage in, etc.;

(4) the insurance group company's articles of association;

(5) the resolution of the shareholders' general meeting of the insurance company consenting to the establishment of the insurance group company;

(6) the audited financial accounting report and solvency report of the insurance company;

(7) the investment certificates issued by a capital verification firm that is creditworthy and photocopies of the original receipts evidencing the crediting of the capital to the account;

(8) the report of the appraisal of the assets to be injected, the plan for safeguarding the rights and interests of customers and creditors and the plan for safeguarding the rights and interests of the employees;

(9) the résumés of the person in charge of the preparatory committee and of the proposed directors, supervisors and senior management personnel and relevant supporting documentation;

(10) the document evidencing ownership of, or the right to use, the place of business;

(11) the medium- and long-term development strategies and plans, business operation plan, plan for investing in third parties and major systems such as the capital and financial management system, risk management system and internal control system;

(12) a report on the establishment of the information system;

(13) the notice of pre-approval of the company name;

(14) a legal opinion issued by a law firm; and

(15) other materials that the CIRC specifies be submitted.

Article 8: The directors, supervisors and senior management personnel of an insurance group company shall satisfy relevant CIRC provisions.

The senior management personnel of an insurance group company include the general manager, deputy general manager(s), assistant to the general manager, board secretary, compliance officer, finance officer and other officers with equivalent functions and powers.

Part Three: Scope of business

Article 9: The business of an insurance group company shall mainly consist of equity investment and management.

The investments in the equity of third parties and the investment in and establishment of related enterprises by an insurance group company shall be made with its own funds.

Article 10: The investments in the equity of third parties and the investments in and establishment of related enterprises by an insurance group company shall be subject to the approval of the CIRC; the application procedure and application materials therefor shall be specified separately by the CIRC.

The application of the capital of an insurance group company, other than that mentioned above, shall comply with the provisions of the CIRC on the application of insurance funds.

Article 11: An insurance group company may invest in the following insurance-type enterprises:

(1) insurance companies;

(2) insurance asset management companies;

(3) dedicated insurance agencies, insurance brokerages and insurance assessors; and

(4) other insurance-type enterprises.

Article 12: An insurance group company may invest in commercial banks and other such non-insurance financial enterprises.

The total amount invested by an insurance group company and its subsidiaries in non-insurance financial enterprises may not exceed 30% of the group's consolidated net assets.

Article 13: When investing in enterprises with identical main business of a single financial sector, in principle, an insurance group company and its subsidiaries may not control more than one enterprise.

Article 14: An insurance group company may invest in non-financial enterprises whose business is related to insurance.

With the exception of the non-financial enterprises whose business is related to insurance as mentioned above, the amount invested in another non-financial enterprise by an insurance group company may not exceed 25% of such enterprise's paid-in capital, and the insurance group company may not be involved in the operations of such enterprise.

The total amount invested by an insurance group company and its subsidiaries in non-financial enterprises may not exceed 10% of the consolidated net assets of the group.

Article 15: An insurance group company may invest overseas. The total amount invested by an insurance group company and its subsidiaries in overseas entities may not exceed 10% of the consolidated net assets of the group, and the total amount invested in any one offshore entity may not exceed 5% of the consolidated net assets of the group.

Article 16: When engaging in insurance business, an insurance group company shall comply with laws and administrative regulations such as the Insurance Law and the Provisions for the Administration of Insurance Companies.

Part Four: Corporate governance

Article 17: Subject to the safeguarding of the business autonomy of subsidiaries as independent legal persons, an insurance group company shall, in accordance with the law, bear ultimate responsibility for the group's overall strategic planning, resource allocation and risk management, exercise centralised management of the group's human resources, financial affairs and accounting, brand culture, etc., strengthen business co-ordination and resource sharing within the group, establish risk management and internal audit systems that cover the entire group, and enhance the entire group's operational efficiency and risk prevention capabilities.

Article 18: An insurance group company shall arrange for the formulation of the group's overall strategic plan, regularly assess the implementation of such plan and revise and improve such plan in light of development realities and changes in the external environment.

An insurance group company shall, based on the group's overall strategic plan, rationally formulate a subsidiary development strategy and business plan. The insurance group company shall establish or designate an appropriate functional department to regularly monitor and assess the implementation of the subsidiary development strategy and business plan and submit management opinions so as to ensure the achievement of the group's overall objectives and the subsidiaries' responsibility objectives.

Article 19: An insurance group company shall establish a compliant governance structure in accordance with the requirements of the Company Law and CIRC regulatory provisions.

An insurance group company shall rationally determine the size and composition of its board of directors based on its own management requirements. The independent directors on the board may not number less than one-third of all of the directors.

The board of directors of an insurance group company shall establish an audit committee, nomination and remuneration committee, strategy management committee, risk management committee and, based on actual circumstances, other specialised committees.

Article 20: An insurance group company shall guide its subsidiaries in establishing their governance structures based on the group's overall strategic plan and the subsidiaries' management requirements and in line with the principles of compliance, simplicity and efficiency.

If a subsidiary is a listed company, its corporate governance shall comply with the listing rules and regulatory requirements for listed companies.

Article 21: An insurance group company shall plan the operation of its and its subsidiaries' shareholders' general meeting, board of directors and supervisory board as a whole in accordance with the law, and strengthen the decision-making support to, and organisation and management of, meetings at different levels and of different types.

An insurance group company shall establish or designate an appropriate functional department to provide decision-making services to the directors it has assigned to its subsidiaries. The directors of the subsidiaries shall be liable in accordance with the law for the decisions they take at board meetings.

Article 22: An insurance group company may not, in performing its management functions toward a subsidiary, abuse its controlling position to harm the lawful rights and interests of the subsidiary or other shareholders.

Article 23: In principle, the hierarchy of equity control between an insurance group company and its subsidiaries may not exceed three tiers.

In principle, there may not be a cross-holding of shares among the members of an insurance group.

In principle, a senior officer of an insurance group company may, at most, concurrently serve as a senior officer with only one subsidiary.

In principle, a senior officer of a subsidiary of an insurance group company may not concurrently serve as senior officer in another subsidiary.

Article 24: An insurance group company shall establish a uniform system for the provision of security for third parties by the group and specify the conditions, amounts and approval procedures for the provision of such security. The provision of security for a third party by the insurance group company or a subsidiary shall be subject to the deliberation and approval of the shareholders' general meeting of the company at the level in question.

The balance of the security provided for third parties by an insurance group company or a subsidiary thereof may not exceed 10% of its net assets.

Article 25: An insurance group company shall establish a system for the management of affiliated transactions and regulate the affiliated transactions within the group.

When a material affiliated transaction occurs between members of an insurance group, the reporting procedure shall be carried out in accordance with CIRC provisions.

Article 26: An insurance group company shall integrate the group's risk management resources, establish a centralised group risk management system and strengthen assessment and prevention of the various internal and external risks to which the group is exposed.

An insurance group company shall establish a compliance and risk management functional department to strengthen compliance and risk management planning and guidance within the group.

Article 27: An insurance group company shall establish a centralised internal audit system, inspect the business activities, financial information and internal controls of the group as a whole and guide and assess the internal auditing work of its subsidiaries.

If an insurance group company implements centralised or vertical management over the internal audit department, its subsidiaries may authorise such department to carry out internal audit work and report the same to the CIRC.

Article 28: An insurance group company shall establish and enhance within the group firewall systems with respect to personnel, funds, business, information, etc. so as to prevent the transmission of risks among members of the insurance group.

Part Five: Capital management

Article 29: An insurance group company shall establish a capital management system that covers the entire group, which system shall include a capital planning mechanism, capital adequacy assessment mechanism, capital constraint mechanism and capital supplementation mechanism, so as to ensure consistency in the scale of its capital and its assets and so that the various risks to which the group is exposed are fully covered.

Article 30: An insurance group company shall set an appropriate capital adequacy target that is in keeping with the group's development strategy, business plans and relevant external factors. It shall ensure that its insurance subsidiaries satisfy regulatory requirements in respect of solvency, that the capital adequacy level of its non-insurance financial subsidiaries complies with the provisions of the financial regulator on an ongoing basis and that the asset to liability ratio of its non-financial subsidiaries is maintained at a reasonable level so as to effect safe and stable operation of the entire group.

Article 31: An insurance group company shall, based on the company's development strategy, industry circumstances and relevant state provisions, formulate a targeted capital requirement plan for itself and its financial subsidiaries for a minimum of three years and ensure full access to the required capital.

Article 32: Each of an insurance group company and its financial subsidiaries shall establish an internal capital adequacy assessment mechanism that is consistent with its own risk features and business environment in order to regularly assess its capital adequacy level.

Article 33: An insurance group company shall establish a capital constraint mechanism within the group and guide the members in strictly complying with the capital constraint targets, paying attention to prudent operations and strengthening risk management when formulating development strategies and business plans, designing products, applying capital, etc.

An insurance group company shall maintain a reasonable and appropriate debt scale and term structure, and maintain a reasonable matching of its asset structure with its liability structure.

Article 34: An insurance group company shall establish a capital supplementation mechanism that is in keeping with the development strategies and business plans of the group members, maintain overall capital adequacy through means such as business adjustments, enhancement of internal profitability and equity or debt financing and set aside a certain amount of funds to be used to perform its obligation of ongoing capital contributions to the members.

When an insurance group company injects the proceeds derived from an issue of subordinated bonds into a member as capital or otherwise, it shall maintain strict control over the insurance group company's double leverage ratio, i.e. the ratio of the net book value of long-term equity investments to owners' equity.

Part Six: Information disclosure

Article 35: An insurance group company shall compliantly disclose information in accordance with the requirements of relevant laws and administrative regulations and while abiding by the principles of truthfulness, accuracy, completeness and comparability.

Article 36: An insurance group company shall disclose the company's basic particulars and information on material events of the year.

Article 37: The basic particulars disclosed by an insurance group company shall include its name, registered capital, legal representative, scope of business, organisational structure, equity structure and basic financial data.

Article 38: The material events of a year that an insurance group company discloses shall, at minimum, include the following:

(1) a change in its controlling shareholder or de facto controller;

(2) a change in its chairman of the board or general manager;

(3) an increase or reduction of its registered capital, a division or a merger;

(4) a material change in its scope of business;

(5) a loss on a material strategic investment or material investment made by it;

(6) its involvement in a material legal action or arbitration procedure;

(7) its establishment, acquisition, merger or closing down of a subsidiary;

(8) other material events that have or could have an effect on its operations, management and, financial position or risk control.

Article 39: An insurance group company shall post its basic particulars and information on material events of the year on its internet website, and update the same within 30 working days after the occurrence of a change.

Part Seven: Oversight

Article 40: The CIRC may require the following work units or individuals to provide data and information on the operations, management and financial position of an insurance group company within a specified period of time:

(1) members of the insurance group;

(2) shareholders and the de facto controller of the insurance group company; and

(3) directors, supervisors and senior management personnel of the insurance group company.

Pursuant to relevant provisions of the Insurance Law and the financial regulation co-ordination mechanism, the CIRC may investigate and gather evidence from banks with which members of an insurance group have accounts, their designated commercial banks, asset custodians, stock exchanges and securities depository and clearing institution.

Article 41: An insurance group company shall submit to the CIRC relevant reports, such as financial accounting reports and solvency reports and other information in a timely manner in accordance with relevant provisions.

Article 42: If a material event that has or could have an effect on an insurance group company's operations, management, financial position, risk control or the safety of customers' assets occurs, the insurance group company shall promptly submit an interim report to the CIRC, giving an account of the cause for the occurrence of the event, the current status, the potential consequences and the countermeasures it proposes to take.

Article 43: If a non-insurance subsidiary of an insurance group company clearly jeopardises the safe operations of an insurance subsidiary, the CIRC may order the insurance group company to dispose of the shares it holds in such subsidiary within a specified period of time or order the insurance group company to reduce its shareholding in the insurance subsidiary to 25% or less.

Article 44: If the capital adequacy level of a financial subsidiary of an insurance group company fails to satisfy the provisions of the financial regulator, the CIRC may require the insurance group company to ensure that such subsidiary achieves capital adequacy through means such as a capital increase or otherwise. If the insurance group company fails to perform the relevant obligation, the CIRC may take regulatory measures against it such as placing restrictions on its investments or business.

Article 45: If an insurance subsidiary of an insurance group company fails to satisfy the prudential regulatory requirements of the financial regulator and its business or financial position deteriorates markedly, the CIRC may require the insurance group company to assist it in restoring its normal operations, or to dispose of, within a certain period, part or all of the equity the insurance group company holds in other members and use the proceeds therefrom to improve the financial position of its insurance subsidiary.

Article 46: The CIRC, as if overseeing a single legal person, shall carry out comprehensive and ongoing consolidated oversight over the capital, financial affairs and risks of an insurance group, and identify, weigh, monitor and assess the overall risk position of the insurance group.

Article 47: In accordance with the principle of “substance over form”, when an insurance group company invests in an organisation as set forth below other than a member, the investee organisation shall be included within the scope of consolidated oversight:

(1) the scale of the assets of the investee organisation is equivalent to a relatively small percentage of the overall scale of the assets of the insurance group, but the risks to which such organisation is exposed are sufficient to have a material effect on the insurance group's financial position and risk level;

(2) the harm and loss arising from the compliance risk or reputation risk to which the investee organisation gives rise are sufficient to have a material effect on the reputation of the insurance group.

Article 48: The CIRC has the right to determine and adjust the scope of consolidated oversight based on changes in the equity structure of an insurance group company, the types of risks to which it is exposed and its risk position, and set regulatory requirements.

An insurance group company shall report to the CIRC on the scope of consolidated oversight and management details.

Part Eight: Supplementary provisions

Article 49: These Measures shall apply mutatis mutandis to insurance companies that directly or indirectly control other insurance-type enterprises but that do not have the words “insurance group” or “insurance holding” in their names.

Article 50: The CIRC shall be in charge of the interpretation of these Measures.

Article 51: These Measures shall be effective as of the date of issuance.