Tentative Measures for the Graded Regulation of Establishments of Insurance Companies

(Issued by the China Insurance Regulatory Commission on, and effective as of, May 25 2010.)

Bao Jian Fa [2010] No.45

Part One: General provisions

Article 1: These Measures have been formulated in accordance with laws and regulations such as the PRC Insurance Law and relevant provisions of the China Insurance Regulatory Commission (the CIRC) in order to guard against and mitigate industry risks, rationally allocate regulatory resources and enhance regulatory efficiency.

Article 2: For the purposes of these Measures, the term “insurance company” means a commercial insurance company, the establishment of which is approved by the CIRC and that is registered in accordance with the law. For the purposes of these Measures, the term “establishment of an insurance company” means a branch, central sub-branch, sub-branch, business office, sales service office or other such establishment established by an insurance company in accordance with the law with the approval of the CIRC.

Article 3: For the purposes of these Measures, the term “graded regulation” means the practice whereby an insurance regulator, based on objective information, comprehensively analyses and assesses the risks which establishments of insurance companies face, classifies them into specific regulatory grades based on the results of the assessment and takes tailored regulatory measures in respect thereof.

Article 4: An insurance regulator shall, in accordance herewith, treat all of the establishments in its jurisdiction of an insurance company as a whole and subject the same to graded regulation.

Article 5: The graded regulation of establishments of insurance companies shall comply with the principle of risk orientation, and graded assessment shall be carried out, and regulatory measures taken, based on the companies' risk positions.

Part Two: Classification method

Article 6: An insurance regulator shall classify the establishments of insurance companies into four grades based on the companies' risk positions:

(1) A-grade institution: means a company whose operations are compliant and no problems in terms of business development, internal controls, etc. are discovered;

(2) B-grade institution: means a company whose operations are relatively compliant and although there are certain problems in terms of its business development, internal controls, etc., they are not serious;

(3) C-grade institution: means a company that has relatively serious compliance problems in its operations or in whose business development, internal controls, etc. there are relatively large risks; and

(4) D-grade institution: means a company that has serious compliance problems in its business operations or in which there are major risks in at least one aspect such as its business development or internal controls.

Article 7: An insurance regulator shall classify the establishments of insurance companies in its jurisdiction based on the three types of monitoring indicators, namely business operation risk indicators, compliance risk indicators and internal control risk indicators, and the information it has learnt in the course of routine oversight. Each type of monitoring indicator comprises specific indicators (for details see the Attachment).

Article 8: An insurance regulator shall determine the assessment grade based on the scores obtained by the establishments of insurance companies on the three types of monitoring indicators and classify the establishments as A, B, C or D based on risk from low to high.

The maximum assessed mark shall be 100. An establishment scoring a mark of at least 80 shall be classed as an A-grade institution, one scoring a mark of between 65 (inclusive) and 80 shall be classed as a B-grade institution, one scoring a mark of between 50 (inclusive) and 65 shall be classed as a C-grade institution and one scoring a mark of less than 50 shall be classed as a D-grade institution.

Article 9: An insurance regulator may appropriately revise its grading assessment in reference to the information it has learnt in the course of routine oversight to determine the final grading.

Part Three: Regulatory measures

Article 10: An insurance regulator shall take different regulatory policies and measures toward the establishments of insurance companies based on implementation of the CIRC's Graded Regulatory measures, and while taking into account the regulatory measures toward insurance companies issued by the CIRC and the risk positions of the establishments in its jurisdiction.

Article 11: An insurance regulator will not take any special regulatory measures against an A-grade institution.

Article 12: An insurance regulator shall take one or more of the following regulatory measures against a B-grade institution:

(1) giving a risk warning;

(2) giving a verbal regulatory warning;

(3) ordering it to rectify the matter within a specified period of time; and/or

(4) conducting an onsite inspection in respect of the existing problem.

Article 13: In addition to taking the measures that are taken against B-grade institutions, an insurance regulator may take one or both of the following regulatory measures against a C-grade institution:

(1) conducting a comprehensive investigation; and/or

(2) recommending that the head office replace the relevant senior management personnel of the establishment.

Article 14: In addition to taking the measures that are taken against B-grade and C-grade institutions, an insurance regulator may, depending on the facts of the non-compliance by the establishment, take one or more of the following regulatory measures against a D-grade institution in accordance with relevant provisions:

(1) suspending approval of the establishment of establishments;

(2) with respect to the seriously non-compliant business, ordering that the same be rectified or that the handling of such business be suspended; and/or

(3) taking other regulatory measures that the insurance regulator deems necessary.

Part Four: Arrangement of implementation

Article 15: The working procedure for the graded regulation of the establishments of insurance companies is set forth below:

(1) submission of information: the establishments of insurance companies regularly submit graded regulation-related information and data to the CIRC and the insurance regulator;

(2) generation of monitoring indicators: the insurance regulator reviews the information submitted by the establishments of insurance companies in its jurisdiction and, while taking into consideration the information it has learnt in the course of routine oversight, calculates the score on the monitoring indicators;

(3) grading assessment: the insurance regulator conducts a grading assessment of the establishments of insurance companies in its jurisdiction based on the monitoring indicators and the information it has obtained or derived in the course of routine oversight and submits the assessment results to the CIRC; the CIRC conducts an overall grading assessment of insurance companies based on the assessment results submitted by the insurance regulator and other relevant data and information; and

(4) implementation of graded regulation: the insurance regulator implements the CIRC's regulatory measures against insurance companies based on the CIRC's uniform arrangement; the insurance regulator takes graded regulatory measures against the establishments of insurance companies in its jurisdiction.

Article 16: An insurance regulator shall conduct an assessment and grading of establishments of insurance companies, and formulate the regulatory measures once each year.

If a material change in the business position or financial position of an establishment of an insurance company occurs, the insurance regulator may revise the company's classification and the corresponding regulatory measures at any time.

Article 17: By March 31 of each year, an insurance regulator shall conduct a grading assessment of the establishments of insurance companies in its jurisdiction based on the data of the preceding year and submit a graded regulation report to the CIRC. A graded regulation report shall contain the following:

(1) the results of the grading assessment;

(2) the implementation of the regulatory measures taken the preceding year and the regulatory measures to be taken next; and

(3) other important matters that need to be explained.

Article 18: An insurance regulator shall periodically circulate to the establishments of insurance companies in its jurisdiction and their head offices the grade into which the company is put and the regulatory measures taken against it.

Part Five: Supplementary provisions

Article 19: The CIRC is in charge of interpreting these Measures.

Article 20: These Measures shall be effective as of the date of issuance.

Attachment:

Monitoring Indicators for Graded Regulation of the Establishments of Insurance Companies