China Insurance Regulatory Commission, Standardising Guidelines for the Management of Compensation of Insurance Companies (Trial Implementation)

Promulgated: July 19 2012
Effective: January 1 2013

Applicability: The term “compensation” means the economic compensation in monetary or non-monetary form received by working personnel of insurance companies for the services they provide to the company.

The term “working personnel” means the personnel that have concluded a written employment contract with the insurance company, excluding non-executive directors, independent directors, external supervisors, independent supervisors and consultants.

The term “directors” means directors that receive compensation from the insurance company. “Supervisors” do not include employee supervisors, and “senior management personnel” refers to the senior management personnel of the head office only.

The term “personnel in crucial positions” refers to personnel who have a direct or material impact on the operating risk of the insurance company. The scope of personnel in crucial positions shall be determined by the insurance company, and shall include but not be limited to the main responsible persons of the departments that directly engage in sales or investment business at the head office, and the main responsible persons of provincial-level branch offices (Article 2).

The Guidelines shall apply to insurance companies, insurance group companies and insurance asset management companies that are lawfully registered in China (Article 3).

Main contents: At least 40% of the payment of performance-based compensation of directors, supervisors, senior management personnel and personnel in crucial positions of an insurance company shall be deferred and the percentage of that of the chairman of the board of directors and general manager shall be at least 50%. An insurance company shall determine the time period for payment of performance-based compensation according to the duration of risks and in principle such period may not be less than three years (Article 13). Where the risks or losses specified in the system for deferred payment of performance-based compensation occur, the insurance company shall stop issuing unpaid performance-based compensation to the relevant responsible personnel (Article 14).

Where an insurance company has been determined as having Category C risks under the regulation by category, the average sum of the basic compensation and performance-based compensation of its directors, supervisors and senior management personnel in the year in question may not be higher than that in the previous year. Where a company has been determined as having Category D risks, the average sum of the basic compensation and performance-based compensation of its directors, supervisors and senior management personnel in the year in question shall be lowered by not less than 5% of that in the previous year. Companies that are determined as having Category A or B risks may, according to the evaluation results of certain indicators employed by the regulation by category, adjust the compensation of the directors, supervisors and senior management personnel in the corresponding positions (Article 19).

Related legislation: PRC Insurance Law (Amended), Feb 28 2009, CLP 2009 No.3 p.35