China Insurance Regulatory Commission, Measures for the Administration of Subordinated Debt with Fixed Term of Insurance Companies

中国保险监督管理委员会保险公司次级定期债务管理办法

November 08, 2011 | BY

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Issue of subordinated debt with fixed term by insurance companies tightened.

Clp Reference: 3910/11.10.06 Promulgated: 2011-10-06 Effective: 2011-10-06

Promulgated: October 6 2011
Effective: as of date of promulgation
Interpreting authority: China Insurance Regulatory Commission

Applicability: The term “insurance companies” refers to Chinese-invested insurance companies, Sino-foreign equity joint insurance companies and wholly foreign-owned insurance companies established in China in accordance with China law (Article 2).

The term “subordinated debt” refers to the debt of insurance companies with a maturity term of at least five years approved to be offered by insurance companies to make up for the provisional or situational inadequate capital, and the discharge of the principal and coupons of which shall follow that of the policy liability and other liabilities, but precede that of the equity capital of the insurance company (Article 3).

Main contents: Where the solvency adequacy ratio of an insurance company is lower than 150% or is estimated to be lower than 150% in the next two years, the company may apply to offer subordinated debt (Article 9).

When applying to offer subordinated debt, an insurance company shall fulfil, among others, the following criteria:

(i) business operation having been commenced for more than three years;

(ii) audited net assets at the end of the previous year being at least Rmb500 million;

(iii) after the offer, the aggregate amount of unpaid principal and interest of the subordinate debt not exceeding 50% of its unaudited net assets at the end of the previous year; and

(iv) its assets not having been appropriated by natural persons, legal persons or other organisations with de facto controlling power or their affiliates (Article 10).

Funds raised by insurance companies from offering subordinated debt may be included in the subsidiary capital but may not be used to make up for the daily operational loss of the company. The amount of subordinated debt included in the subsidiary capital may not exceed 50% of the insurance company's net assets (Article 4). Insurance group (holding) companies may not offer subordinated debt (Article 5).

Related legislation: PRC Insurance Law (Amended), Feb 28 2009, CLP 2009 No.3 p.35; and PRC Company Law (Amended), Oct 27 2005, CLP 2005 No.10 p.21

Repealed legislation: Tentative Measures for the Administration of Subordinated Debt with Fixed Term of Insurance Companies, Sept 29 2004

clp reference:3910/11.10.06promulgated:2011-10-06effective:2011-10-06

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