Tentative Measures for the Administration of the Application of Insurance Capital

Article 1: These Measures have been formulated pursuant to laws and administrative regulations such as the PRC Insurance Law (the Insurance Law) in order to regulate the application of insurance capital, guard against the risks associated with the application of insurance capital, safeguard the lawful rights and interests of insurance parties and promote the sustainable and healthy development of the insurance industry.

Article 2: These Measures shall govern the insurance capital application activities engaged in by insurance group (holding) companies and insurance companies legally established in China.

Article 3: For the purposes of these Measures, the term “insurance capital” means the registered capital, reserve funds, undistributed profits, various reserves and other capital of insurance group (holding) companies and insurance companies denominated either in renminbi or foreign currencies.

Article 4: The application of insurance capital must be sound, abide by the principle of safety and comply with regulatory requirements in respect of solvency. Asset-liability management and comprehensive risk management shall be implemented based on the nature of the insurance capital so as to achieve intensiveness, professionalism, compliance and a market orientation.

Article 5: The China Insurance Regulatory Commission (the CIRC) exercises oversight over insurance capital application activities in accordance with the law.

Part Two: Forms of capital application

Section One: Scope of capital application

Article 6: The application of insurance capital shall be restricted to:

(1) bank deposits;

(2) trading in negotiable securities such as bonds, stocks and shares of securities investment funds;

(3) investment in immovable assets; and

(4) other forms of capital application as specified by the State Council.

If insurance capital is invested overseas, relevant oversight provisions of the CIRC shall be complied with.

Article 7: If insurance capital is to be placed in bank deposits, a commercial bank satisfying the following conditions shall be selected as the deposit bank:

(1) one whose capital adequacy ratio, net assets and provision coverage satisfies regulatory requirements;

(2) one whose governance structure is compliant, internal control systems are sound and business performance is good;

(3) one that has not been found to have committed a major violation of laws or regulations during the most recent three years; and

(4) one whose credit rating has been at the investment grade or above for three years in succession.

Article 8: Bonds in which insurance capital is invested shall have a credit rating that was assessed by a credit rating agency recognised by the CIRC and satisfies the prescribed requirements, and mainly include government bonds, financial bonds, enterprise (corporate) bonds, non-financial enterprise debt-financing instruments and other bonds that satisfy provisions.

Article 9: Stocks in which insurance capital is invested mainly include stocks that have been publicly offered, listed and traded and stocks privately offered by listed companies to specific targets.

Provisions for the investment in stocks of companies listed on the growth enterprise board and stocks subscribed for and traded in foreign currencies will be formulated separately by the CIRC.

Article 10: When insurance capital is to be invested in a securities investment fund, the fund manager thereof shall satisfy the following conditions:

(1) having good corporate governance, and having maintained net assets of at least Rmb100 million for three years in succession;

(2) performing contracts in accordance with the law, safeguarding the lawful rights and interests of investors and not having a record of improper conduct during the most recent three years;

(3) having erected an effective firewall mechanism between the securities investment fund and its asset management business for special customers; and

(4) having a stable investment team, having a good investment track record and the size of the assets under its management or fund shares being relatively stable.

Article 11: The immovable assets in which insurance capital is invested refer to land, buildings and other attachments to land. The specific measures therefor will be formulated by the CIRC.

Article 12: The equity in which insurance capital is invested shall be the equity of companies limited by shares and limited liability companies lawfully established and registered in China and not publicly listed on a stock exchange.

Article 13: An insurance group (holding) company or insurance company may not use funds in its various reserves to purchase immovable assets for its own use or to make an equity investment that confers control over another enterprise.

Article 14: An equity investment by an insurance group (holding) company or insurance company that confers control over another enterprise shall satisfy regulatory requirements in respect of solvency. If an insurance subsidiary of an insurance group (holding) company does not satisfy CIRC regulatory requirements in respect of solvency, the insurance group (holding) company may not invest in non-insurance financial enterprises.

Equity investments that confer control shall be limited to the following enterprises:

(1) insurance enterprises, including insurance companies, insurance asset management firms, dedicated insurance agencies and insurance brokerages;

(2) non-insurance financial enterprises; and

(3) insurance business-related enterprises.

Article 15: An insurance group (holding) company or insurance company that engages in the application of insurance capital may not:

(1) place deposits in non-bank financial institutions;

(2) purchase shares that the stock exchange subjects to “special treatment” or “special treatment with a warning that there is a risk of termination of listing”;

(3) invest in the equity of enterprises or immovable assets that does/do not have stable cash flow return prospects or asset appreciation value or that involve(s) projects that fail to satisfy state industrial policy, such as those that are highly polluting;

(4) directly engage in real estate development and construction;

(5) engage in venture capital investment;

(6) use the investment assets derived from the application of insurance capital to provide security for, or extend loans to, third parties, with the exception of personal policy pledge loans; or

(7) carry out other investment acts as prohibited by the CIRC.

The CIRC may appropriately revise the prohibitive provisions governing the application of insurance capital based on relevant circumstances.

Article 16: When engaging in the application of insurance capital, an insurance group (holding) company or insurance company shall comply with the following percentage requirements:

(1) the book value of investments in assets such as bank demand deposits, government bonds, central bank bills, policy bank bonds and money market funds may not in total be less than 5% of the company's total assets as at the end of the preceding quarter;

(2) the book value of investments in unsecured enterprise (corporate) bonds and non-financial enterprise debt-financing instruments may not in total exceed 20% of the company's total assets as at the end of the preceding quarter;

(3) the book value of investments in stocks and stock funds may not in total exceed 20% of the company's total assets as at the end of the preceding quarter;

(4) the book value of investments in the equity of unlisted enterprises may not exceed 5% of the company's total assets as at the end of the preceding quarter; the book value of investments in unlisted enterprise equity-related financial products may not exceed 4% of the company's total assets as at the end of the preceding quarter, and the total of the foregoing two items may not exceed 5% of the company's total assets as at the end of the preceding quarter;

(5) the book value of investments in immovable assets may not exceed 10% of the company's total assets as at the end of the preceding quarter; the book value of investments in immovable asset-related financial products may not exceed 3% of the company's total assets as at the end of the preceding quarter, and the total of the foregoing two items may not exceed 10% of the company's total assets as at the end of the preceding quarter;

(6) the book value of investments in debt investment plans in infrastructure and other such plans may not exceed 10% of the company's total assets as at the end of the preceding quarter; and

(7) the aggregate investment costs of equity investments by an insurance group (holding) company or insurance company that confer control over other enterprises may not exceed its net assets.

The balance of funds derived from bond redemption, and assets in the form of investment-linked insurance products and in the form of non-life investment type insurance products with no fixed returns shall be subtracted from the total assets mentioned in Items (1) to (6) of the preceding paragraph. The total assets of an insurance group (holding) company shall be the group parent company's total assets.

The term “non-financial enterprise debt-financing instrument” means a negotiable security issued by a non-financial enterprise with legal personality on the interbank bond market the principal of which and the interest on which is agreed to be repaid/paid within a certain period of time.

The term “unlisted enterprise equity-related financial product” means an investment plan or investment fund, etc. promoted and established or offered in China by an equity investment management firm in accordance with the law and whose underlying assets are the equity of unlisted enterprises.

The term “immovable asset-related financial product” means an investment plan or investment fund, etc. promoted and established or offered in China by an immovable asset investment management firm in accordance with the law and whose underlying assets are immovable assets.

The term “infrastructure debt investment plan or other such plan” means a financial instrument that involves the issuance of investment plan beneficiary certificates in accordance with relevant provisions by an insurance asset management firm or other such professional management firm to raise funds from insurance companies and other such principals to be invested in infrastructure projects, etc. and in connection with which it pays the principal and the anticipated returns as agreed.

An insurance group (holding) company or insurance company shall control the percentages invested in investment instruments, a single product, with a single transaction counterparty, in affiliates and the percentages invested in a single target by companies within the group so as to guard against risks inherent in capital application concentration.

The specific measures for the administration of the application of insurance capital will be formulated by the CIRC. The CIRC may appropriately revise the investment percentages for the application of insurance capital based on relevant circumstances.

Article 17: When capital is applied to investment-linked insurance products and to non-life investment type insurance products with no fixed returns, they shall be separated from other insurance product capital at the levels of asset segregation, asset allocation, investment management, staffing, investment transactions and risk control. The specific measures therefor will be formulated by the CIRC.

Section Two: Capital application model

Article 18: An insurance group (holding) company or insurance company shall effect intensive and professional management of insurance capital in accordance with the requirements of “centralised management, uniform allocation and professional operation”.

Insurance capital shall be centrally managed and applied by organisations with legal personality; branches and sub-branches may not engage in the application of insurance capital.

Article 19: An insurance group (holding) company or insurance company shall select a qualified commercial bank or other such professional institution to exercise third party custody and supervision over the application of insurance capital. The specific measures therefor will be formulated by the CIRC.

The insurance assets in the custody of the custodian shall be kept separate from the custodian's own assets and from the other assets in the custodian's custody. If the custodian is liquidated due to being dissolved in accordance with the law, being closed down in accordance with the law or being declared bankrupt in accordance with the law or other such reason, the assets in its custody shall not form part of the property available for liquidation.

Article 20: When a custodian engages in the custody of insurance capital, its main duties shall include:

(1) insurance capital custody, settlement and delivery, and asset appraisal;

(2) monitoring of investment acts;

(3) disclosure of information to relevant parties;

(4) maintenance of the confidentiality of trade secrets in accordance with the law; and

(5) other duties as specified in laws, regulations, CIRC provisions and the contract.

Article 21: When engaging in the custody of insurance capital, a custodian may not:

(1) divert the capital in its custody for other purposes;

(2) mix the management of capital in its custody with that of its own capital or mix the management of capital in different custody accounts;

(3) utilise capital in its custody and related information to seek illegal gains; or

(4) commit other illegal acts.

Article 22: The investment management capabilities of an insurance group (holding) company or insurance company shall satisfy the relevant standards specified by the CIRC.

Based on its investment management capabilities and risk management capabilities, an insurance group (holding) company or insurance company may invest on its own or appoint an insurance asset management firm to do so on its behalf.

Article 23: If an insurance group (holding) company or insurance company appoints an insurance asset management firm to invest on its behalf, it shall conclude a written contract therewith specifying the parties' rights and obligations and ensuring the mutual independence of the duties of the principal, the agent and the custodian.

The insurance group (holding) company or insurance company shall perform the duties of formulating the asset strategic allocation guidelines, selecting the agent, monitoring the performance by the agent, assessing the agent's investment performance, etc.

The insurance asset management firm shall implement the principal's asset allocation guidelines, assemble an investment portfolio based on the particularities of the insurance capital and treat different capital equitably.

Article 24: When an insurance group (holding) company or insurance company appoints an insurance asset management firm to invest on its behalf, it may not:

(1) prevent or interfere with the agent's normal performance of its duties;

(2) demand that the agent provide information on other agents;

(3) demand that the agent provide a minimum investment return guarantee;

(4) illegally divert insurance profits; or

(5) commit other illegal acts.

Article 25: An insurance asset management company that has accepted an appointment to manage insurance capital may not:

(1) invest in violation of the contract provisions;

(2) treat different capital in an inequitable manner;

(3) mix the management of its own and of entrusted capital or that of the capital of different principals;

(4) divert capital entrusted to it for other purposes;

(5) provide a minimum investment return undertaking to the principal;

(6) use insurance capital and the assets derived from the investment thereof to provide security for third parties; or

(7) commit other illegal acts.

Article 26: An insurance asset management firm may, in accordance with relevant CIRC provisions, use the invested products falling within the scope of the application of insurance capital as the underlying assets for the insurance asset management product business it engages in.

When an insurance group (holding) company or insurance company appoints an insurance asset management firm to invest on its behalf or purchases insurance asset management products therefrom, the insurance asset management firm shall disclose to relevant parties information on the capital investment orientation, investment management, capital custody, risk management and material contingencies in accordance with the contract in a timely manner and ensure that the information it discloses is true, accurate and complete.

An insurance asset management firm shall specify the rate for, and the method of paying, the management fee with the principal or the investment firm in contract form based on market principles and in light of factors such as the size of the assets entrusted, the type of assets, the product risk features and investment performance.

The term “insurance asset management product business” means the investment management activities engaged in for the benefit of investors by an insurance asset management firm as issuer or manager involving the sale of product shares to investors such as insurance group (holding) companies, insurance companies and insurance asset management firms to raise funds and the selection of a commercial bank or other such professional firm as custodian.

Part Three: Decision implementation mechanism

Section One: Organisational structure and duties

Article 27: An insurance group (holding) company or insurance company shall establish sound corporate governance, expressly specify in its articles of association and relevant rules and regulations the duties of the shareholders' general meeting, board of directors, supervisory board and management in the application of insurance capital and realise the mutual separation and mutual checking among the decision-making authority, operating authority and supervision authority over the application of insurance capital.

Article 28: The application of insurance capital shall be subject to a system wherein the board of directors is in charge. The board of directors of an insurance company shall bear ultimate responsibility for asset allocation, investment policy, risk control and compliance management and mainly perform the following duties:

(1) reviewing and deciding on the rules and regulations for the management of the application of insurance capital;

(2) determining the method of managing the application of insurance capital;

(3) reviewing and deciding on the investment decision procedure and authorisation mechanism;

(4) reviewing and deciding on the asset strategic allocation plan, annual investment plans, and investment guidelines and relevant revisions thereof;

(5) deciding on material investments;

(6) reviewing and deciding on the investment strategy and operational plan for new investment products;

(7) establishing a system for assessment of capital application performance; and

(8) other relevant duties.

The board of directors shall establish an asset and liability management committee (investment decision committee) and risk management committee.

Article 29: When an insurance group (holding) company or insurance company is to decide on appointing an insurance asset management firm to invest on its behalf and on material insurance capital application matters such as investment in unsecured bonds, stocks, equity and immovable assets, the same shall be subject to consideration and adoption by the board of directors.

Article 30: The management of an insurance group (holding) company or insurance company shall perform the following duties as authorised by the board of directors:

(1) being responsible for the day-to-day operation and management of the application of insurance capital;

(2) establishing a consulting mechanism between the insurance capital application department, on the one hand, and the financial, actuarial, product and risk control departments, on the other;

(3) considering the insurance asset strategic allocation plan and annual asset allocation strategies drafted by the asset management department and submitting the same to the Board of Directors for review and determination;

(4) controlling and managing the risks associated with the application of insurance capital;

(5) implementing the asset allocation plan and annual asset allocation strategies reviewed and decided by the board of directors;

(6) proposing revisions to the asset strategic allocation revision plan; and

(7) other duties.

Article 31: An insurance group (holding) company or insurance company shall establish a dedicated insurance asset management department that is independent from the financial, actuarial, risk control and other such business departments and performs the following duties:

(1) drafting the rules and regulations for the management of the application of insurance capital;

(2) drafting the asset strategic allocation plan and annual asset allocation strategies;

(3) drafting the asset strategic allocation revisions plans;

(4) implementing the annual asset allocation plans;

(5) implementing measures for management of the risks associated with the application of insurance capital; and

(6) other duties.

When an insurance group (holding) company or insurance company invests on its own, the insurance asset management department shall be responsible for day-to-day management of investment and trading; if it appoints an insurance asset management firm to invest on its behalf, the asset insurance management department shall perform the duties of the principal, such as monitoring investment acts and evaluating investment performance.

Article 32: The asset management department of an insurance group (holding) company or insurance company shall establish positions at stages such as investment research, asset settlement, risk control, performance evaluation and relevant assurances, establish a firewall system and realise professional, compliant and procedural operation.

If an insurance group (holding) company or insurance company invests on its own, the asset management department shall establish investment, trading and other such positions directly related to capital application.

Article 33: The risk management department of an insurance group (holding) company or insurance company and departments with corresponding management functions shall perform the following duties:

(1) drafting rules and regulations for the management of the risks associated with the application of insurance capital;

(2) reviewing and monitoring the lawfulness and compliance of the application of insurance capital;

(3) identifying, evaluating, tracking, controlling and managing the risks associated with the application of insurance capital;

(4) reporting on a regular basis on the management of the risks associated with the application of capital; and

(5) other duties.

Article 34: An insurance asset management firm shall have a chief risk management officer.

The chief risk management officer shall be a member of the company's senior management personnel, be responsible for organising and guiding the insurance asset management firm's risk management, the scope of his/her duties shall encompass all the business stages in the operation of the insurance asset management firm, he/she shall independently report relevant matters to the board of directors and the CIRC and shall submit proposals for guarding against and dissipating major risks.

The chief risk management officer may not be in charge of investment management. If he/she needs to be replaced, the reason therefor and details of the performance of his/her duties shall be reported to the CIRC in writing at least five working days before the replacement.

Section Two: Capital application procedure

Article 35: An insurance group (holding) company or insurance company shall establish and enhance rules and regulations for the management of the application of insurance capital and an internal control mechanism, clarify the way each stage and relevant positions mesh and the operating standards, strictly separate the responsibilities of front, middle and back office positions, regularly inspect and evaluate the implementation of the rules and regulations and duly ensure the clear demarcation of their powers and duties, that they are relatively independent and that they mutually check each other. The relevant rules and regulations include, but are not limited to the following:

(1) rules and regulations for asset allocation;

(2) rules and regulations for investment research, decision-making and authorisation;

(3) rules and regulations for the management of trading and settlement;

(4) rules and regulations for performance evaluation and assessment;

(5) rules and regulations for the management of information systems; and

(6) rules and regulations for risk management, etc.

Article 36: An insurance group (holding) company or insurance company shall treat the independent legal person as the unit, which shall have overall responsibility for the domestic and foreign markets, comprehensively consider factors such as solvency constraints, the external environment, risk preferences and regulatory requirements, analyse liability targets such as insurance capital costs, cash flow and terms and elect to allocate the assets with the pertinent risk-adjusted return features, terms and liquidity.

Article 37: An insurance group (holding) company or insurance company shall establish a professional analysis platform and use external research results to study and formulate the models, rules and regulations covering the management of transaction counterparties and selection of investment products, set up an investment pool, reserve pool and prohibited investment pool system, and track and analyse market changes in real time so as to provide the basis for decisions on the application of insurance capital.

Article 38: An insurance group (holding) company or insurance company shall establish and enhance an investment decision-making and authorisation system that is relatively centralised, hierarchically managed and in which powers and responsibilities are unified, clearly specify the authorisation method, authority, criteria, procedure, period of validity and responsibilities, and conduct inspections of authorisations and check accountability level by level.

Article 39: An insurance group (holding) company or insurance company shall establish and enhance a fair trading mechanism, effectively control the operational risk and moral hazard of relevant personnel, guard against technical and security holes in the trading system and ensure the compliance, fairness and validity of transactions. The fair trading mechanism shall, at minimum, include the following:

(1) implementation of a centralised trading system and strict separation of investment decision-making and transaction execution;

(2) establishment of a centralised transaction monitoring system, advance warning system and feedback system that satisfy relevant requirements;

(3) establishment of a sound trade recording system; and

(4) fair treatment of different capital at the levels of account opening, research support, resource allocation, personnel management, etc.

Article 40: An insurance group (holding) company or insurance company shall establish a performance evaluation system and evaluation criteria that have asset and liability management at their core, regularly carry out performance evaluations and attribution analysis of the application of insurance capital and promote long-term investment, value investment and diversified investment so as to achieve the overall objectives of the application of insurance capital.

Article 41: An insurance group (holding) company or insurance company shall establish an insurance capital application information management system that minimises or eliminates manipulation factors and automatically identifies, gives forewarnings of and manages and controls asset management risks so as to ensure real time understanding of the risk situation.

The information management system shall have compliance and risk indicator thresholds, and the various risk monitoring factors shall be incorporated into the relevant information technology systems so as to reduce operational risk and prevent moral hazard.

A comprehensive risk management database that collects and integrates basic market information, records the raw data on insurance capital management and investment transactions and ensures sharing of the information platform shall be established in the information management system.

Part Four: Risk management and control

Article 42: An insurance group (holding) company or insurance company shall establish a comprehensive coverage insurance capital application risk management organisation system and operating mechanism that provides monitoring of the entire procedure and involves all personnel, improve risk management technologies and the information technology system and classify, identify, weigh and evaluate various risks through means such as the management system and audits so as to guard against and dissipate risks.

Article 43: An insurance group (holding) company or insurance company shall manage and control risks associated with the mismatching of assets and liabilities, strengthen cost and return management, term management and risk budgeting on the basis of solvency constraints and the liability characteristics of the insurance products, determine risk limits for the application of insurance capital and evaluate and manage asset mismatch risks through means such as gap analysis and sensitivity and scenario testing.

Article 44: An insurance group (holding) company or insurance company shall manage and control liquidity risk, test, under different scenarios, the liquidity risk level that it can tolerate and its own risk tolerance capacity based on the particularities of its insurance business and its risk preferences, and formulate liquidity risk management strategies, policies and procedures in order to guard against liquidity risk.

Article 45: An insurance group (holding) company or insurance company shall manage and control market risk, evaluate and manage interest rate risk, exchange rate risk and financial market fluctuation risk, establish an effective market risk evaluation and management mechanism and implement market risk limit management.

Article 46: An insurance group (holding) company or insurance company shall manage and control credit risk, establish a credit risk management system, in a timely manner, track and evaluate credit risks, carry out tracking analysis of its futures position credit products and transaction counterparties and regularly organise back tests.

Article 47: An insurance group (holding) company or insurance company shall strengthen management of interbank lending, bond buyback, margin trading and short selling, strictly control margin scale and the use of leverage and prohibit speculation and the use of funds from short-term interbank loans to invest in high risk and low liquidity assets. The participation of insurance capital in derivatives transactions shall be limited to the hedging of risks and may not be used for speculation or amplification of trading. The specific measures therefor will be formulated by the CIRC.

Article 48: An insurance group (holding) company or insurance company shall leverage the supervisory function of internal and external audits, and conduct comprehensive internal audits of the application of insurance capital at least once per year. The internal control audit reports shall reveal the compliance and risk situation of the management of the application of insurance capital. A departure audit of senior management personnel in charge of investment, the person in charge of the insurance capital application department and personnel in important positions shall be conducted before such persons leave service.

An insurance group (holding) company or insurance company shall regularly report the results of its internal audits of the application of insurance capital and the results of the departure audits of relevant personnel to the CIRC.

Article 49: An insurance group (holding) company or insurance company shall establish a mechanism for dealing with the risks associated with the application of insurance capital, formulate a contingency plan and, in a timely manner, control and dissipate latent risks. When an investment asset experiences a major reduction in value or when a claim cannot be discharged, a plan for dealing with the same shall be formulated and, in a timely manner, reported to the CIRC.

Article 50: An insurance group (holding) company or insurance company shall ensure that the risk management and control-related positions and personnel have the right to know and the right of inquiry needed to perform their duties, have the right to review and examine all data, information and details relating to the application of insurance capital and have the right to attend in a non-voting capacity meetings related to the application of insurance capital.

Part Five: Oversight

Article 51: The CIRC oversees the application of insurance capital through a combination of both onsite oversight and offsite oversight.

Article 52: The CIRC shall classify insurance group (holding) companies and insurance companies into different categories with respect to the application of insurance capital and regulate them accordingly, and subject them to ongoing oversight and dynamic evaluation based on their corporate governance structures, solvency, investment management capabilities and risk management capabilities.

The CIRC shall reinforce the capital constraints on insurance companies, determine a system of indicators for the oversight of risks associated with the application of insurance capital and take pertinent regulatory measures based on evaluation results so as to guard against and dissipate risks.

Article 53: The qualifications for their positions of the senior management personnel of an insurance group (holding) company or insurance company who are in charge of investment, the person in charge of its asset management department and the directors, supervisors and senior management personnel of an insurance asset management firm shall be subject to the approval of the CIRC before they take up their positions.

Article 54: Material equity investments by insurance group (holding) companies and insurance companies shall be submitted to the CIRC for approval.

An insurance asset management product offered, or promoted and established by an insurance asset management firm shall be submitted for approval the first time, and subsequent similar products reported after the fact.

The CIRC will conduct compliance and procedural reviews of the aforementioned matters in accordance with relevant provisions.

The term “material equity investment” means an investment that would confer control over the targeted non-insurance financial enterprise or insurance business-related enterprise.

Article 55: The CIRC has the right to require an insurance group (holding) company or insurance company to provide reports, statements, documents and information.

The reports, statements, documents and information so submitted shall be timely, true, accurate and complete.

Article 56: A resolution on a material investment adopted by the shareholders' general meeting, shareholders' meeting or board of directors of an insurance group (holding) company or insurance company shall be reported to the CIRC within five working days after the adoption of such resolution, unless otherwise provided by the CIRC.

Article 57: The CIRC has the right to request that the data of an insurance group (holding) company or insurance company relating to the application of insurance capital be linked dynamically to the CIRC's oversight information system.

Article 58: If the solvency position of an insurance group (holding) company or insurance company fails to satisfy CIRC requirements, the CIRC may place restrictions on the forms of capital application available to it and the percentages thereof.

Article 59: If an insurance group (holding) company or insurance company violates relevant provisions on the forms of capital application or percentages thereof, the CIRC will order it to rectify the matter within a specified period of time.

Article 60: The CIRC has the right to call in the directors, supervisors and senior management personnel of an insurance group (holding) company or insurance company and the person in charge of its asset management department for a regulatory lecture, and require them to give an account of the application of insurance capital, risk control, internal management and other such material matters.

Article 61: If an insurance group (holding) company or insurance company commits a serious violation of relevant provisions on capital application, the CIRC may order the replacement of the person in charge and relevant management personnel.

Article 62: If an insurance group (holding) company or insurance company that has committed a serious violation of relevant provisions on the application of insurance capital and been ordered to rectify the matter within a specified period of time fails to effect such rectification before the expiration of the specified period of time, the CIRC may decide to assign relevant personnel to organise a rectification team and carry out rectification of the company.

Article 63: If an insurance group (holding) company or insurance company violates the provisions hereof in the application of its insurance capital, the CIRC will impose administrative penalties in accordance with the law.

Article 64: If another concerned party involved in the application of insurance capital violates a relevant law, administrative regulations or these Measures in the course of participating in insurance capital application activities, the CIRC shall record its improper conduct and report the relevant circumstances to the department in charge of its industry. If the circumstances are serious, the CIRC may notify the insurance group (holding) company or insurance company that it may not engage in relevant business with such party for three years and consult with the relevant regulatory department on imposing administrative penalties in accordance with the law.

Article 65: If a member of the working personnel of the CIRC abuses his/her authority, is derelict in his/her duties, or divulges the trade secrets of relevant entities and individuals to which he/she is privy, his legal liability shall be pursued in accordance with the law.

Part Six: Supplementary provisions

Article 66: The management and application of insurance capital by insurance asset management firms shall be handled with reference to these Measures.

Article 67: The application of the funds in the insurance protection fund, etc. paid by insurance companies shall be handled in accordance with the provisions therefor.

Article 68: If the CIRC provides otherwise in respect of the application of capital by insurance group (holding) companies, such provisions shall apply.

Article 69: The CIRC is in charge of interpreting and revising these Measures.

Article 70: These Measures shall be effective as of August 31 2010. In the event of a discrepancy between these Measures and existing relevant policies and provisions, these Measures shall prevail.