PRC Insurance Law (Revised in 2014)

Article 3: This Law shall apply to all insurance activities engaged in within the People's Republic of China.

Article 4: Parties engaging in insurance activities must obey laws and administrative regulations, defer to the norms of social ethics, and may not harm the public interest.

Article 5: The parties to insurance activities shall abide by the principle of good faith when exercising their rights and performing their obligations.

Article 6: Insurance business shall be engaged in by insurance companies established in accordance with this Law and other insurance organisations specified in laws and administrative regulations. Other work units and individuals may not engage in insurance business.

Article 7: Legal persons and other organisations in the People's Republic of China that need to take out domestic insurance policies shall do so with insurance companies in the People's Republic of China.

Article 8: Insurance business shall be engaged in and managed separately from banking, securities or trust business, and insurance companies and banking, securities or trust business institutions shall be established separately, unless otherwise provided by the state.

Article 9: The State Council's insurance regulatory authority shall regulate the insurance business in accordance with the law.

The State Council's insurance regulatory authority shall establish agencies as required for the performance of its duties. An agency shall perform its regulatory duties as authorised by the State Council's insurance regulatory authority.

Part Two: Insurance contract

Section One: General provisions

Article 10: An insurance contract is an agreement in which a proposer and an insurer stipulate their respective obligations and rights in respect of an insurance policy.

The term “proposer” refers to the party that concludes an insurance contract with the insurer and bears the obligation to pay insurance premiums in accordance with the contract.

The term “insurer” refers to the insurance company that concludes an insurance contract with a proposer and is liable for payment of insurance indemnities or benefits in accordance with the contract.

Article 11: To conclude an insurance contract, the parties shall reach agreement through consultations and determine their respective rights and obligations based on the principle of fairness.

Except where laws and administrative regulations require that insurance be taken out, insurance contracts shall be concluded by the parties of their own free will.

Article 12: When concluding a personal insurance contract, the proposer shall have an insurable interest in the insured.

The insured under property insurance shall, when an insured event occurs, have an insurable interest in the subject matter of insurance.

Personal insurance is insurance under which the subject matter of insurance is the life and body of a person.

Property insurance is insurance under which the subject matter of insurance is property and related interests therein.

The term “insured” means the person whose property or whose own person is protected by the insurance contract and who has the right to claim insurance proceeds. The proposer may be the insured.

The term “insurable interest” means the legally recognised interest that the proposer or insured has in the subject matter of insurance.

Article 13: An insurance contract shall be formed when a proposer makes a request for insurance and the insurer agrees to insure. The insurer shall issue the proposer an insurance policy document or other insurance certificate in a timely manner.

The insurance policy document or other insurance certificate shall specify the contractual terms agreed upon by the parties. The parties may agree to adopt another written form to specify the contractual terms.

A lawfully formed insurance contract shall enter into effect once it is formed. The proposer and insurer may agree to attach conditions to, or specify a period of time for, the validity of the contract.

Article 14: Once an insurance contract has been formed, the proposer shall pay insurance premiums in accordance therewith, and the insurer shall assume insurance liability starting from the time agreed thereto.

Article 15: Unless otherwise provided in this Law or in the insurance contract, the proposer may terminate an insurance contract after it has been formed while the insurer may not.

Article 16: When concluding an insurance contract, if the insurer asks questions on the relevant circumstances of the subject matter of insurance or relevant circumstances of the insured, the proposer shall provide truthful information.

If the proposer deliberately, or due to gross negligence, fails to perform its obligation of disclosure as mentioned in the preceding paragraph which failure could influence the insurer on its decision as to whether or not to agree to insure or whether or not to raise the premium rate, the insurer shall have the right to terminate the insurance contract.

The right to terminate the contract as specified in the preceding paragraph shall be extinguished if it is not exercised within 30 days after the date on which the insurer learnt of the reason for termination. Once two years have lapsed from the date of formation of the contract, the insurer may not terminate the contract. If an insured event occurs, the insurer shall bear the obligation of paying indemnities or insurance benefits.

If the proposer deliberately fails to perform its obligation of disclosure, the insurer shall not be liable to pay indemnities or insurance benefits or refund the insurance premiums for insured events that occurred before the termination of the contract.

If the proposer fails to perform its obligation of disclosure due to gross negligence which failure has a material bearing on the occurrence of an insured event, the insurer shall not be liable to pay indemnities or insurance benefits for such insured event if it occurs before the termination of the contract, but shall refund the insurance premiums.

If the insurer, when concluding the contract, was aware that the proposer failed to provide truthful information, it may not terminate the contract. If an insured event occurs, the insurer shall bear the obligation of paying indemnities or insurance benefits.

The term “insured event” refers to an event falling within the scope of insurance liability as specified in the insurance contract.

Article 17: If standard clauses provided by the insurer are used when concluding an insurance contract, the application provided to the proposer by the insurer shall have the standard terms attached thereto and the insurer shall explain the provisions of the contract to the proposer.

The insurer shall, when concluding an insurance contract, provide on the application, insurance policy document or other insurance certificate a reminder sufficient to draw the attention of the proposer to the clauses in the insurance contract that exempt it from liability and shall expressly explain the contents of such clauses to the proposer in writing or orally. If no such reminder or express explanation is given, such clauses shall not enter into effect.

Article 18: An insurance contract shall contain the following:

(1) name and domicile of the insurer;

(2) names and domiciles of the proposer and the insured, as well as the name and domicile of the beneficiary in the case of personal insurance;

(3) the subject matter of insurance;

(4) insurance liability and liability exemptions;

(5) term and starting date of coverage;

(6) the insured amount;

(7) insurance premium and the payment method;

(8) method for payment of indemnities or insurance benefits;

(9) liability for breach of contract and dispute resolution; and

(10) date of conclusion of contract.

The proposer and the insurer may agree upon other matters relating to the insurance.

The term “beneficiary” means the person designated by the insured or the proposer in a personal insurance contract with the right to claim the insurance proceeds. The proposer or the insured may be the beneficiary.

The term “insured amount” means the maximum amount of indemnities or insurance benefits payable by the insurer.

Article 19: The following terms in an insurance contract concluded using standard clauses provided by the insurer shall be invalid:

(1) terms that exempt the insurer from obligations it is required to bear in accordance with the law or that increase the liability of the proposer or the insured; and

(2) terms that deny the rights enjoyed by the proposer, the insured or the beneficiary in accordance with the law.

Article 20: The proposer and the insurer may hold consultations to amend provisions of the contract.

Amendment to an insurance contract shall have the insurer endorse the same on the insurance policy document or other insurance certificate or affix an endorsement slip thereto, or have the proposer and the insurer conclude a written agreement on the amendment.

Article 21: The proposer, the insured or the beneficiary shall notify the insurer in a timely manner once they have learnt of the occurrence of an insured event. If notification is deliberately not given or not given due to gross negligence, making the nature or cause of, or the extent of the losses due to, the insured event difficult to determine, the insurer shall not be liable to pay indemnities or insurance benefits for the portion that is impossible to determine, unless the insurer learnt or ought to have learnt in a timely manner of the occurrence of the insured event by other means.

Article 22: When lodging a claim with the insurer for payment of indemnities or insurance benefits in accordance with the insurance contract after the occurrence of an insured event, the proposer, the insured or the beneficiary shall provide to the insurer all proofs and information it/he/she can provide pertinent to determining the nature or cause of, the extent of the losses due to, and other circumstances of the insured event.

If the insurer, pursuant to the contract, believes that relevant supporting documentation and information is incomplete, it shall, in a timely manner, notify the proposer, the insured or the beneficiary one time to provide the missing documentation or information.

Article 23: Once an insurer receives a claim from the insured or beneficiary for the payment of indemnities or insurance benefits, it shall render its determination in a timely manner. If the circumstances are complex, it shall render its determination within 30 days, unless otherwise provided in the contract. The insurer shall notify the insured or beneficiary of the results of its determination. If the claim falls within the insured liability, the insurer shall perform its obligation of paying the indemnities or insurance benefits within 10 days after reaching agreement on paying the indemnities or insurance benefits with the insured or beneficiary. If the insurance contract provides a time limit for payment of the indemnities or insurance benefits, the insurer shall perform its obligation of paying the indemnities or insurance benefits in accordance with such provisions.

If the insurer fails to perform the obligations listed in the preceding paragraph in a timely manner, in addition to paying the insurance proceeds, it shall also compensate the insured or the beneficiary for losses incurred therefrom.

No work unit or individual may unlawfully interfere with the insurer's performance of its obligation to pay indemnities or insurance benefits, nor may it/he/she restrict the rights of the insured or the beneficiary to obtain such payments.

Article 24: After it has rendered its determination pursuant to Article 23 hereof, if the claim does not fall within the insured liability, the insurer shall give written notice to the insured or beneficiary of its refusal to pay indemnities or insurance benefits and give the reasons therefor within three days from the date on which it rendered its determination.

Article 25: If the amount of indemnities or insurance benefits cannot be determined within 60 days after an insurer receives a claim for indemnities or insurance benefits and the relevant proofs and information, the insurer shall first pay the amount that may be determined based on the proofs and information available. After determining the final amount of indemnities or insurance benefits, the insurer shall make up any difference.

Article 26: The period of prescription for the lodging of a claim with the insurer for payment of indemnities or insurance benefits by the insured or beneficiary of an insurance policy other than a life insurance policy shall be two years, counting from the date on which he learnt or ought to have learnt of the occurrence of the insured event.

The period of limitation of actions for the lodging of a claim with the insurer for payment of insurance benefits by the insured or beneficiary of a life insurance policy shall be five years, counting from the date on which he learnt or ought to have learnt of the occurrence of the insured event.

Article 27: If an insured event has not occurred but the insured or beneficiary falsely claims that such an event has occurred, and lodges a claim with the insurer for the payment of indemnities or insurance benefits, the insurer shall have the right to terminate the contract and not return the insurance premiums.

If the proposer or the insured deliberately causes an insured event, the insurer shall have the right to terminate the contract and shall not be liable for the payment of indemnities or insurance benefits. Unless otherwise provided in Article 43 hereof, it will not refund the insurance premiums.

If the proposer, the insured or the beneficiary fabricates false causes for an event or overstates the extent of the losses by means of forged or altered relevant proofs, information or other evidence after the occurrence of such event, the insurer shall not be liable for payment of indemnities or insurance benefits for the portion that is false.

If the proposer, the insured or the beneficiary commits any of the acts specified in the preceding three paragraphs and causes the insurer to pay insurance proceeds or incur expenses, it/he/she shall return the insurance proceeds to or compensate the insurer.

Article 28: “Reinsurance” means that the insurer transfers a portion of its insured business to another insurer in the form of a ceded policy.

At the request of the reinsurer, the reinsurance cedent shall inform the reinsurer in writing of the liability borne by the reinsurance cedent and other circumstances of the original insurance policy.

Article 29: The reinsurer may not request payment of premiums from the proposer of the original insurance policy.

The insured or beneficiary of the original insurance policy may not lodge any claim with the reinsurer for payment of indemnities or insurance benefits.

The reinsurance cedent may not refuse to perform or delay the performance of its responsibilities with the original insurance policy on the grounds that the reinsurer has not performed its reinsurance responsibilities.

Article 30: If a dispute arises between an insurer and the proposer, the insured or the beneficiary over the terms of an insurance contract concluded using standard terms provided by the insurer, such terms shall be construed based on the usual understanding thereof. If a contract term permits more than one interpretation, the people's court or arbitration institution shall interpret it in the manner that is favourable to the insured or beneficiary.

Section Two: Personal insurance contract

Article 31: A proposer shall have an insurable interest in the following persons:

(1) him/herself;

(2) his/her spouse, children or parents;

(3) other family members or close relatives, in addition to those aforementioned, who have a foster, support or maintenance relationship with the proposer; and

(4) employees who have an employment relationship with the proposer.

In addition to the circumstances mentioned in the preceding paragraph, the proposer shall be deemed to have an insurable interest in the insured if the insured consents to the conclusion of the contract by the proposer on his/her behalf.

If, at the time of the conclusion of the contract, the proposer does not have an insurable interest in the insured, the contract shall be invalid.

Article 32: If the age of the insured reported by the proposer is false and the insured's true age does not comply with the age restriction specified in the contract, the insurer may terminate the contract and refund, in accordance with the contract, the cash value of the policy. The third paragraph and sixth paragraph of Article 16 hereof shall apply to the exercise by the insurer of its right to terminate the contract.

If the age of the insured reported by the proposer is false, resulting in the proposer paying a lower insurance premium than the insurance premium that should have been paid, the insurer shall have the right to correct the same and request the proposer to make up for the premium in short, or, when paying insurance benefits, disburse the same in proportion to the percentage of the insurance premium that should have been paid accounted for by the insurance premium actually paid.

If the age of the insured reported by the proposer is false, resulting in the proposer paying a higher insurance premium than the insurance premium that should have been paid, the insurer shall refund the excess premium to the proposer.

Article 33: A proposer may not take out a personal insurance policy stipulating death as a condition for payment of insurance benefits for a person without capacity for civil acts, and an insurer may not insure the same.

The restrictions of the preceding paragraph shall not apply to personal insurance policies taken out by parents for their minor children. However, the total of the insurance benefits payable upon the death of the insured may not exceed the limit specified by the State Council's insurance regulatory authority.

Article 34: A contract stipulating death as a condition for payment of insurance benefits shall be invalid without the consent of the insured and his/her approval of the insured amount.

An insurance policy document issued in accordance with a contract stipulating death as a condition for payment of insurance benefits may not be transferred or pledged without the written consent of the insured.

The restrictions of the first paragraph hereof shall not apply to personal insurance policies taken out by parents for their minor children.

Article 35: A proposer may, in accordance with the contract, pay the entire insurance premium to the insurer in one lump sum or pay it in instalments.

Article 36: If the contract provides for the payment in instalments of the insurance premium, and the proposer, after payment of the initial instalment of the insurance premium, fails to pay an instalment within 30 days after the date of a reminder from the insurer or within 60 days after the specified time limit, the validity of the contract shall be suspended or the insurer shall reduce the insured amount in accordance with the conditions specified in the contract, unless otherwise provided in the contract.

If an insured event occurs in respect of the insured during the period specified in the preceding paragraph, the insurer shall pay the insurance benefits in accordance with the contract, but may deduct the outstanding insurance premium therefrom.

Article 37: If the validity of a contract is suspended in accordance with Article 36 hereof, its validity shall be restored after the insurer and the proposer reach agreement thereon through consultations and the proposer pays the outstanding insurance premium. However, if the parties fail to reach an agreement within two years from the date on which the validity of the contract was suspended, the insurer shall have the right to terminate the contract.

If the insurer terminates the contract pursuant to the preceding paragraph, it shall, in accordance with the contract, refund the cash value of the policy.

Article 38: An insurer may not resort to litigation to require payment from a proposer in respect of life insurance premiums.

Article 39: The beneficiary of a personal insurance policy shall be designated by the insured or proposer.

Where the beneficiary is designated by the proposer, the consent of the insured must be obtained. If a proposer takes out personal insurance policies on workers with whom it/he/she has an employment relationship, it/he/she may not designate anyone other than the insured or their close relatives as beneficiaries.

Where the insured is a person without capacity for civil acts or with limited capacity for civil acts, the beneficiary may be designated by his/her guardian.

Article 40: The insured or proposer may designate one or more persons as beneficiaries. Where there is more than one beneficiary, the order and proportions in which insurance benefits shall be paid shall be determined by the insured or proposer. Where proportions for benefits distribution are not determined, benefits shall be divided equally among the beneficiaries.

Article 41: The insured or proposer may change the beneficiary and shall notify the insurer thereof in writing. Once the insurer receives written notice of the change of beneficiary, it shall endorse the same on the insurance policy document or other insurance certificate or affix an endorsement slip thereto.

A change of the beneficiary made by the proposer shall be subject to the consent of the insurer.

Article 42: In any of the following circumstances, if the insured dies, the insurance proceeds shall become part of his/her estate and the insurer shall perform its obligation of paying the insurance benefits in accordance with the PRC Inheritance Law.

(1) no beneficiary was designated or the designation of the beneficiary is unclear and determination thereof is impossible;

(2) the beneficiary dies before the insured, and there is no other beneficiary; or

(3) the beneficiary loses or waives his/her beneficiary rights in accordance with the law, and there is no other beneficiary.

If the beneficiary and the insured both die in the same event and the sequence of their deaths is impossible to establish, the beneficiary shall be assumed to have died first.

Article 43: If the proposer deliberately causes the death, injury, disability or illness of the insured, the insurer shall not be liable for payment of insurance benefits. Where the proposer has already fully paid insurance premiums for two or more years, the insurer shall refund the cash value of the insurance policy to the other entitled beneficiaries in accordance with the contract.

If a beneficiary deliberately causes the death, injury, disability or illness of the insured or deliberately attempts to murder the insured, such beneficiary shall forfeit his/her beneficiary rights.

Article 44: If a contract stipulates the death of the insured as a condition for payment of insurance benefits and the insured commits suicide within two years from the date of formation of the contract or the restoration of its validity, the insurer shall not be liable to pay the insurance benefits, unless the insured, at the time of his/her suicide, was without civil capacity.

If the insurer is not liable to pay insurance benefits according to the preceding paragraph, it shall, in accordance with the contract, refund the cash value of the policy.

Article 45: If the insured wilfully commits a crime or resists lawfully applied criminal enforcement measures, resulting in his/her injury, disability or death, the insurer shall not be liable to pay insurance benefits. If the proposer has paid in full two or more years of insurance premiums, the insurer shall, in accordance with the contract, refund the cash value of the policy.

Article 46: If the occurrence of an insured event such as death, injury, disability or illness of the insured is caused by the act of a third party, the insurer shall not be entitled to the right of recourse against the said third party after paying the insurance benefits to the insured or beneficiary. However, the insured or beneficiary shall still retain the right to claim compensation from the said third party.

Article 47: If the proposer terminates the contract, the insurer shall, in accordance with the contract, refund the cash value of the policy within 30 days from the date of receipt of the notice of termination of the contract.

Section Three: Property insurance contract

Article 48: If the insured, at the time of the occurrence of an insured event, does not have an insurable interest in the subject matter of insurance, it/he/she may not lodge a claim with the insurer for payment of indemnities.

Article 49: Where the subject matter of insurance is transferred, the transferee thereof shall succeed to the rights and obligations of the insured.

Where the subject matter of insurance is transferred, the insured or transferee shall notify the insurer in a timely manner, except in the case of cargo insurance contracts and contracts that provide otherwise.

If the transfer of the subject matter of insurance appreciably increases the degree of risk, the insurer may, in accordance with the contract, increase the insurance premium or terminate the contract within 30 days of the date of receipt of the notice specified in the preceding paragraph. If the insurer terminates the contract, it shall refund to the proposer the insurance premium collected minus, in accordance with the contract, the portion to which it is entitled for the period between the date of commencement of its insurance liability and the date of termination of the contract.

If the insured or the transferee fails to perform its notification obligation as provided in the second paragraph hereof and an insured event occurs due to the appreciable increase in the degree of risk to the subject matter of insurance resulting from the transfer, the insurer shall not be liable to pay indemnities.

Article 50: Cargo insurance contracts or voyage insurance contracts may not be terminated by the contractual parties once the insurance liability has commenced.

Article 51: The insured shall abide by relevant state provisions on fire prevention, safety, production operation, labour protection, etc. in order to protect the safety of the subject matter of insurance.

The insurer may, in accordance with the contract, examine the circumstances of the safety of the subject matter of insurance, and issue to the proposer and/or the insured written proposals for the elimination of unsafe factors and hidden dangers.

If either the proposer or insured fails to fulfil its/his/her due diligence requirements towards the safety of the subject matter of insurance in accordance with the contract, the insurer shall have the right to request an increase in the insurance premium or terminate the contract.

Subject to the consent of the insured, the insurer may take precautionary measures to protect the safety of the subject matter of insurance.

Article 52: If the degree of risk to the subject matter of insurance increases appreciably during the term of the contract, the insured shall notify the insurer in accordance with the contract in a timely manner and the insurer may, in accordance with the contract, increase the insurance premium or terminate the contract. If the insurer terminates the contract, it shall refund to the proposer the insurance premium collected, minus, in accordance with the contract, the portion to which it is entitled for the period between the date of commencement of its insurance liability until the date of termination of the contract.

If the insured fails to perform its notification obligation as provided in the preceding paragraph and an insured event occurs due to the appreciable increase in the degree of risk to the subject matter of insurance, the insurer shall not be liable to pay indemnities.

Article 53: In any of the following circumstances, unless the contract has provided otherwise, the insurer shall reduce the insurance premium and refund the appropriate amount of insurance premium calculated on a daily basis:

(1) a change occurs in the circumstances upon which the insurance premium rate was determined, resulting in a marked decrease in the degree of risk to the subject matter of insurance; or

(2) the insured value of the subject matter of insurance decreases markedly.

Article 54: If the proposer requests termination of the contract before commencement of the insurance liability, it/he/she shall, in accordance with the contract, pay the service charge to the insurer and the insurer shall refund the insurance premiums. If the proposer requests termination of the contract after commencement of the insurance liability, the insurer shall refund to the proposer the insurance premiums collected, minus, in accordance with the contract, the portion to which it is entitled for the period between the date of commencement of its insurance liability until the date of termination of the contract.

Article 55: If the proposer and the insurer agree upon the insured value of the subject matter of insurance and specify the same in the contract, the agreed-upon insured value shall serve as the criterion for calculating the indemnities should the subject matter of insurance suffer a loss.

If the proposer and the insurer have not agreed upon the insured value of the subject matter of insurance, the actual value of the subject matter of insurance shall serve as the criterion for calculating the indemnities should the subject matter of insurance suffer a loss.

The insured amount may not exceed the insured value. If the insured amount exceeds the insured value, the portion exceeding the insured value shall be invalid and the insurer shall refund the corresponding portion of the insurance premiums.

If the insured amount is less than the insured value, the insurer shall, unless otherwise specified in the contract, be liable for payment of the indemnities in proportion to the percentage of the insured value accounted for by the insured amount.

Article 56: Information relevant to overlapping insurance shall be reported by the proposer to all concerned insurers.

The total of indemnities payable by the insurers in the event of overlapping insurance may not exceed the insured value. Unless otherwise specified in the contracts, each insurer shall be liable for payment of the indemnities in proportion to the percentage of the total insured amount accounted for by its insured amount.

The proposer of overlapping insurance may, in respect of the portion of the total insured amount exceeding the insured value, request that each insurer refund the insurance premiums pro rata.

The term “overlapping insurance” means insurance where the proposer concludes insurance contracts with two or more insurers in respect of the same subject matter of insurance, the same insurable interest and the same insured events, and the total of the insured amounts exceeds the insured value.

Article 57: When an insured event occurs, the insured shall, with due diligence, take necessary measures to prevent or mitigate losses.

The necessary and reasonable expenses incurred by the insured in the prevention or mitigation of losses of the subject matter of insurance after the occurrence of an insured event shall be borne by the insurer. The amount of such expenses shall be calculated separately from the amount of compensation for the losses of the subject matter of insurance, and the maximum shall not exceed the insured amount.

Article 58: If part of the subject matter of insurance suffers a loss, the proposer may terminate the contract within 30 days of compensation from the insurer; and, unless otherwise provided by the contract, the insurer may also terminate the contract but shall notify the proposer 15 days in advance.

If the contract is terminated, the insurer shall refund to the proposer the insurance premiums for the portion of the subject matter of insurance that did not suffer a loss, minus, in accordance with the contract, the portion to which it is entitled for the period between the date of commencement of its insurance liability until the date of termination of the contract.

Article 59: After the occurrence of an insured event, where the insurer has paid the insured amount in full and the insured amount is the same as the insured value, all rights to the damaged subject matter of insurance shall pass to the insurer, or, where the insured amount is less than the insured value, the insurer shall obtain partial rights to the damaged subject matter of insurance in proportion to the percentage of the insured value accounted for by the insured amount.

Article 60: Where an insured event occurs due to damage to the subject matter of insurance caused by a third party, the insurer may, from the date of payment of indemnities to the insured, exercise the insured's right to claim compensation from the third party by subrogation within the amount of indemnities.

Where the insured has already obtained damages from the third party following the occurrence of an insured event mentioned in the preceding paragraph, the insurer may, when paying the indemnities, appropriately deduct the amount of compensation obtained by the insured from the third party.

The exercise by the insurer of its right to claim compensation by subrogation in accordance with the first paragraph hereof shall not affect the insured's right to claim compensation from the third party for the portion that has not been compensated.

Article 61: Where the insured waives its right to claim compensation from the third party after the occurrence of an insured event and before the insurer pays indemnities, the insurer shall not be liable for the payment of indemnities.

If after the insurer has paid indemnities to the insured, the insured, without the consent of the insurer, waives its/his/her right to claim compensation from the third party, such waiver shall be deemed invalid.

If, due to a deliberate act or gross negligence by the insured, the insurer cannot exercise its right to claim compensation by subrogation, it may deduct, or demand reimbursement of, the corresponding portion of the indemnities.

Article 62: Except where the family members or members of the household of the insured deliberately cause an insured event specified in the first paragraph of Article 60 hereof, the insurer may not exercise the right to claim compensation by subrogation from family members or members of the household of the insured.

Article 63: When the insurer exercises its right to claim compensation from a third party by subrogation, the insured shall provide the insurer the necessary documents and relevant circumstances it/he/she has learnt.

Article 64: The necessary and reasonable expenses incurred by the insurer and the insured in the investigation and determination of the nature or cause of an insured event and the extent of the losses incurred by the subject matter of insurance shall be borne by the insurer.

Article 65: For damage to a third party caused by the insured of a liability insurance policy, the insurer may directly pay indemnities to the third party in accordance with the law or the contract.

If the insured of a liability insurance policy causes damage to a third party and the compensation liability owed to the third party by the insured have been determined, the insurer shall, at the request of the insured, pay the indemnities directly to the third party. If the insured fails to make such request, the third party shall have the right to directly lodge a claim with the insurer for payment of indemnities in respect of the portion of the compensation he/she is owed.

If the insured of a liability insurance policy causes damage to a third party and fails to compensate the third party, the insurer may not pay indemnities to the insured.

The term “liability insurance” means insurance of which the subject matter is the liability borne by the insured to compensate a third party in accordance with the law.

Article 66: If arbitration or litigation proceedings are instituted against the insured of a liability insurance policy due to an insured event that caused damage to a third party, the arbitration or litigation costs and other necessary and reasonable expenses paid by the insured shall be borne by the insurer, unless otherwise provided by the contract.

Part Three: Insurance companies

Article 67: Establishment of insurance companies shall be subject to the approval of the State Council's insurance regulatory authority.

When examining the application for the establishment of an insurance company, the State Council's insurance regulatory authority shall take into consideration the development of the insurance industry and the requirements of fair competition.

Article 68: The following conditions shall be met for the establishment of an insurance company:

(1) the main shareholders having the capacity for sustained profitability, a good reputation, not having a record of a major violation of laws or regulations during the most recent three years and having net assets of not less than Rmb200 million;

(2) having articles of association in compliance with this Law and the PRC Company Law;

(3) having the registered capital as specified herein;

(4) having directors, supervisors and senior management personnel with the professional knowledge of their positions and work experience in the business;

(5) having a sound organisational structure and management system;

(6) having a place of business that meets the requirements, and having other business-related facilities; and

(7) other conditions as specified by laws, administrative regulations or the State Council's insurance regulatory authority.

Article 69: The minimum registered capital required for the establishment of an insurance company shall be Rmb200 million.

The State Council's insurance regulatory authority may, based on the scope of business and the size of insurance companies, adjust the minimum registered capital provided that the same is not lower than the limit specified in the first paragraph hereof.

The registered capital of an insurance company must be paid-in monetary capital.

Article 70: When applying to establish an insurance company, a written application and the following materials shall be submitted to the State Council's insurance regulatory authority:

(1) an application letter for establishment, specifying the name, registered capital and scope of business, etc. of the proposed insurance company;

(2) a feasibility study report;

(3) a plan for the preparation for establishment;

(4) the business licences or other background information of the investors and their financial accounting reports for the previous year audited by an accounting firm;

(5) a list containing the names of the person in charge of the preparatory committee and the proposed chairman of the board and managers approved by the investors and those person's proofs of acceptance; and

(6) other materials as specified by the State Council's insurance regulatory authority.

Article 71: The State Council's insurance regulatory authority shall examine the application for the establishment of an insurance company, render its decision on whether or not to grant approval for preparation of establishment and notify the applicant thereof in writing within six months from the date of acceptance of the application. If it decides to withhold approval, it shall give the reasons therefor in writing.

Article 72: The applicant shall complete the preparatory work within one year from the date of receipt of the notice of approval for preparation of establishment. It may not engage in insurance business activities during the preparatory period.

Article 73: If the applicant meets the conditions for establishment set forth in Article 68 hereof after completion of the preparatory work, it may submit to the State Council's regulatory authority an application to commence operations.

The State Council's insurance regulatory authority shall render its decision on whether or not to grant approval for commencement of operations within 60 days from the date of acceptance of the application to commence operations. If it decides to grant approval, it shall issue a permit to engage in insurance business. If it decides to withhold approval, it shall notify the applicant in writing and give the reasons therefor.

Article 74: An insurance company shall obtain approval of the insurance regulatory authority for establishment of a (sub-) branch in the People's Republic of China.

The (sub-) branch of an insurance company shall have no legal personality and its civil liability shall be borne by the insurance company.

Article 75: When an insurance company wishes to establish a (sub-) branch, it shall submit a written application and the following materials to the insurance regulatory authority:

(1) a written application for establishment;

(2) a three-year business development plan for the proposed institution and market analysis materials;

(3) the résumés of the proposed senior management personnel and relevant supporting documentation; and

(4) other materials as specified by the State Council's insurance regulatory authority.

Article 76: The insurance regulatory authority shall examine the application for the establishment of a (sub-) branch of an insurance company and render its decision on whether or not to grant approval within 60 days from the date of acceptance of the application. If it decides to grant approval, it shall issue a permit for the (sub-) branch to engage in insurance business. If it decides to withhold approval, it shall notify the applicant in writing and give the reason therefor.

Article 77: An insurance company or a (sub-) branch thereof that has been granted approval for establishment shall carry out registration procedures with, and collect its business licence from, the administration for industry and commerce on the strength of its permit to engage in insurance business.

Article 78: If an insurance company or a (sub-) branch thereof fails to register with the administration for industry and commerce within six months from the date on which it obtained its permit to engage in insurance business without a legitimate reason, its permit to engage in insurance business shall become null and void.

Article 79: An insurance company shall obtain the approval of the State Council's insurance regulatory authority for establishment of a subsidiary, (sub-) branch or representative office outside the People's Republic of China.

Article 80: If a foreign insurance institution wishes to establish a representative office in the People's Republic of China, it shall require the approval of the State Council's insurance regulatory authority. Such representative office may not engage in insurance business activities.

Article 81: The directors, supervisors and senior management personnel of an insurance company shall be of good conduct, be familiar with insurance-related laws and administrative regulations, have the operations and management capabilities required to perform their duties and have obtained, before taking up their positions, approval of their qualifications for their positions from the insurance regulatory authority.

The scope of the senior management personnel of insurance companies shall be specified by the State Council's insurance regulatory authority.

Article 82: If any of the circumstances set forth in Article 146 of the PRC Company Law or set forth below applies to a person, he/she may not serve as a director, supervisor or member of the senior management personnel of an insurance company:

(1) he/she was a director, supervisor or member of the senior management personnel of a financial institution who had his or her qualifications for the position revoked by the financial regulator due to a violation of the law or a breach of discipline and less than five years have lapsed since the date of such revocation; or

(2) he/she was a lawyer, chartered accountant or a professional in an asset appraisal firm, verification firm or other such firm who had his or her practice qualifications revoked due to a violation of the law or a breach of discipline and less than five years have lapsed since the date of such revocation.

Article 83: If a director, supervisor or member of the senior management personnel of an insurance company violates laws or administrative regulation or breaches the company's articles of association in the course of performing his or her company duties, thereby causing the company to incur a loss, he/she shall be liable for compensation.

Article 84: An insurance company shall obtain approval from the insurance regulatory authority for any of the following circumstances:

(1) change of name;

(2) change of registered capital;

(3) change of the place of business of the company or of any (sub-) branch;

(4) cancellation of a (sub-) branch;

(5) division or merger of the company;

(6) amendment to the company's articles of association;

(7) a change in a shareholder whose capital contribution accounts for at least 5% of the total capital of the limited liability company or in a shareholder who holds at least 5% of the shares of the company limited by shares; or

8) another circumstance as specified by the State Council's insurance regulatory authority.

Article 85: An insurance company shall employ professionals to establish an actuarial reporting system and compliance reporting system.

Article 86: An insurance company shall submit relevant reports, statements, documents and information in accordance with the provisions of the insurance regulatory authority.

The solvency reports, financial accounting reports, actuarial reports, compliance reports and other relevant reports, statements, documents and information of an insurance company shall truthfully record insurance business matters and may not contain false records, misleading statements or material omissions.

Article 87: An insurance company shall duly keep complete account books, original vouchers and relevant information pertaining to its business activities in accordance with the provisions of the State Council's insurance regulatory authority.

The period for keeping the account books, original vouchers and relevant information mentioned in the preceding paragraph shall be counted from the date on which the insurance contract ends and shall be not less than five years for an insurance term of less than one year and not less than 10 years for an insurance term of more than one year.

Article 88: When an insurance company intends to engage or dismiss an accounting firm, asset appraisal firm, credit rating agency or other such intermediary firm, it shall report the same to the insurance regulatory authority. If it intends to dismiss its accounting firm, asset appraisal firm, credit rating agency or other such intermediary firm, it shall give the reason therefor.

Article 89: If an insurance company needs to be dissolved as a result of a division or merger, or if the shareholders' meeting or shareholders' general meeting resolves to dissolve it, or if a reason for dissolution as specified in the company's articles of association arises, it shall be dissolved following the approval of the State Council's insurance regulatory authority.

An insurance company engaging in life insurance business may not be dissolved for any reason other than division, merger or its being closed down in accordance with the law.

When an insurance company is dissolved, a liquidation committee shall be established in accordance with the law to liquidate it.

Article 90: If the circumstances specified in Article 2 of the PRC Enterprise Bankruptcy Law apply to an insurance company, the insurance company or its creditors may, with the consent of the State Council's insurance regulatory authority, apply to a people's court in accordance with the law for restructuring, settlement or bankruptcy liquidation. The State Council's insurance regulatory authority may also apply to the people's court in accordance with the law for the restructuring or bankruptcy liquidation of said insurance company.

Article 91: After the discharge on a priority basis of the bankruptcy expenses and debts of common interest, the property in bankruptcy shall be applied in the following sequence:

(1) payment of the outstanding wages, medical subsidies, disability subsidies and disability and death pensions of employees, outstanding basic old-age insurance and basic medical insurance premiums payable into employees' personal accounts and compensation payable to employees as specified in laws and administrative regulations;

(2) payment of indemnities or insurance benefits;

(3) payment of the insurance company's outstanding social insurance premiums, other than those specified in Item (1), and outstanding taxes; and

(4) payment of ordinary bankruptcy claims.

If the property in bankruptcy is insufficient to discharge all of the claims at one level of the sequence, it shall be distributed pro rata.

The wages of the directors, supervisors and senior management personnel of a bankrupt insurance company shall be calculated at the average wage of the company's employees.

Article 92: If an insurance company that engages in life insurance business is closed down in accordance with the law or is declared bankrupt in accordance with the law, its life insurance contracts and liability reserve must be transferred to another insurance company that engages in life insurance business. If it fails to reach a transfer agreement with another insurance company, the State Council's insurance regulatory authority shall designate an insurance company that engages in life insurance business to accept the transfer.

The transfer or the designated acceptance of the transfer by the State Council's insurance regulatory authority of the life insurance contracts and liability reserve as specified in the preceding paragraph shall safeguard the lawful rights and interests of the insured and beneficiaries.

Article 93: If an insurance company terminates its business operations in accordance with the law, its permit to engage in insurance business shall be cancelled.

Article 94: Unless otherwise provided herein, the PRC Company Law shall apply to insurance companies.

Part Four: Insurance business rules

Article 95: The scope of business of insurance companies shall include:

(1) personal insurance business, including insurance business such as life insurance, health insurance and accidental injury insurance;

(2) property insurance business, including insurance business such as property loss insurance, liability insurance, credit insurance and guarantee insurance; and

(3) other business related to insurance as approved by the State Council's insurance regulatory authority.

An insurer may not concurrently engage in personal insurance business and property insurance business. However, an insurance company engaging in property insurance business may, with the approval of the State Council's insurance regulatory authority, engage in short-term health insurance business and accidental injury insurance business.

An insurance company shall engage in insurance business activities within its scope of business approved by the State Council's insurance regulatory authority in accordance with the law.

Article 96: Subject to the approval of the State Council's insurance regulatory authority, insurance companies may engage in the following reinsurance business for insurance business specified in Article 95 hereof:

(1) ceding reinsurance; and

(2) assuming reinsurance.

Article 97: An insurance company shall allocate 20% of its total registered capital as a security bond and deposit the same with a bank designated by the State Council's insurance regulatory authority. Such security bond may not be used except to discharge debts when the company is liquidated.

Article 98: Insurance companies shall make allocations to various liability reserves based on the principle of protecting the interests of the insured and guaranteeing solvency.

Specific measures for the allocation and carry-over of funds to liability reserves by insurance companies shall be formulated by the State Council's insurance regulatory authority.

Article 99: An insurance company shall make allocations to a common reserve fund.

Article 100: An insurance company shall make contributions to an insurance security fund.

Such insurance security fund shall be managed centrally and use thereof shall be made in a co-ordinated manner in the following circumstances:

(1) to provide relief to proposers, insured and beneficiaries when an insurance company is closed down or is declared bankrupt;

(2) to provide relief to the insurance company that accepts in accordance with the law its life insurance contracts when an insurance company is closed down or is declared bankrupt; or

(3) other circumstances as specified by the State Council.

The specific measures for the funding, management and use of the insurance security fund shall be formulated by the State Council.

Article 101: An insurance company shall have the minimum solvency appropriate to the size of its business and its degree of risk. The difference derived by subtracting an insurance company's admissible liabilities from its admissible assets may not be lower than the figure specified by the State Council's insurance regulatory authority. If such difference falls below the specified figure, the insurance company shall, as required by the State Council's insurance regulatory authority, take appropriate measures to reach such figure.

Article 102: The self-retained insurance premiums of a year of an insurance company engaging in property insurance business may not exceed four times the sum of its paid-in capital and common reserve.

Article 103: The liability borne by an insurance company for each risk unit, that is, the maximum range of loss that may be caused by a single insured event, may not be more than 10% of the sum of its paid-in capital and common reserve. The portion exceeding the sum shall be reinsured.

The demarcation of risk units by an insurance company shall comply with the provisions of the State Council's insurance regulatory authority.

Article 104: An insurance company's methodology for demarcating risk units and its arrangement for catastrophic risks shall be submitted to the State Council's insurance regulatory authority for the record.

Article 105: An insurance company shall arrange for reinsurance in accordance with the provisions of the State Council's insurance regulatory authority, and prudently select the reinsurer.

Article 106: An insurance company shall apply its capital in a sound manner and comply with the principle of safety.

The application of an insurance company's capital shall be limited to the following:

(1) bank deposits;

(2) purchase and sale of negotiable securities, such as bonds, stocks and securities investment fund shares;

(3) investment in immovable property; and

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

The specific measures for the administration of the application of insurance company capital shall be formulated by the State Council's insurance regulatory authority based on the preceding two paragraphs.

Article 107: With the approval of the State Council's insurance regulatory authority in concert with the State Council's securities regulatory authority, an insurance company may establish an insurance asset management company.

In engaging in securities investment activities, an insurance asset management company shall comply with laws and administrative regulations such as the PRC Securities Law.

The measures for the administration of insurance asset management companies shall be formulated by the State Council's insurance regulatory authority in concert with relevant State Council departments.

Article 108: An insurance company shall establish a system for the management of, and disclosure of information on, affiliated transactions in accordance with the provisions of the State Council's insurance regulatory authority.

Article 109: The controlling shareholder(s), de facto controller(s), directors, supervisors and senior management personnel of an insurance company may not use affiliated transactions to harm the interests of the company.

Article 110: An insurance company shall truthfully, accurately and completely disclose its financial accounting reports, risk management position, details of its insurance product business and other such material matters in accordance with the provisions of the State Council's insurance regulatory authority.

Article 111: An insurance company's insurance salespersons shall satisfy the qualification conditions specified by the State Council's insurance regulatory authority and have a qualification certificate issued by the insurance regulatory authority.

The scope, and the measures for the administration of, the insurance salespersons mentioned in the preceding paragraph shall be specified by the State Council's insurance regulatory authority.

Article 112: An insurance company shall establish a system for the registration and management of insurance agents, enhance the training and management of insurance agents and may not incite or induce insurance agents to engage in activities that breach their obligation of good faith.

Article 113: An insurance company and its (sub-) branches shall use their permits to engage in insurance business in accordance with the law and may not transfer, lease out or lend out such permits.

Article 114: An insurance company shall draft its insurance terms and premium rates in a fair and reasonable manner in accordance with the provisions of the State Council's insurance regulatory authority and may not harm the lawful rights and interests of proposers, insured and beneficiaries.

An insurance company shall perform its obligation of paying indemnities or insurance benefits in accordance with its contracts and this Law in a timely manner.

Article 115: In engaging in its business, an insurance company shall comply with the principle of fair competition and may not engage in unfair competition.

Article 116: Insurance companies and their working personnel may not commit any of the following acts in the course of insurance business activities:

(1) defrauding the proposer, insured or beneficiary;

(2) concealing important circumstances pertinent to the insurance contract from the proposer;

(3) hindering the proposer from performing, or inducing the proposer not to perform, its/his/her obligation of disclosure as specified herein;

(4) offering or promising to offer rebates on insurance premiums or other benefits not specified in the insurance contract to the proposer, insured, or beneficiary;

(5) refusing to perform, in accordance with the law, the obligation to pay insurance indemnities or benefits as specified in the insurance contract;

(6) deliberately fabricating insured events or insurance contracts or overstating the extent of losses incurred by an insured event that has happened to lodge falsified claims, fraudulently obtain insurance proceeds or obtain other improper gains.

(7) diverting, retaining or misappropriating insurance premiums;

(8) engaging, for the purpose of conducting insurance sales activities, an organisation or individual that lacks lawful qualifications;

(9) exploiting its/his/her engagement in the insurance business to seek improper gains for another organisation or individual;

(10) using an insurance agent, insurance brokerage or insurance assessor to engage in illegal activities such as illicitly obtaining fees by engaging in fictitious insurance intermediary business or fabricating cancellation of insurance policies, etc.;

(11) damaging the goodwill of a competitor through means such as the fabrication and dissemination of false facts, or engaging in other acts of unfair competition to disturb the order of the insurance market;

(12) divulging the trade secrets of proposers or insured learnt in the course of business activities; or

(13) committing other acts that violate laws, administrative regulations or provisions of the State Council's insurance regulatory authority.

Part Five: Insurance agents and insurance brokerages

Article 117: Insurance agents shall be institutions or individuals engaged by an insurer to handle insurance business on behalf of the insurer within the scope of the insurer's authorisation and that charge a commission fee from the insurer.

Insurance agencies include both dedicated insurance agencies that engage exclusively in insurance agency business and non-dedicated insurance agencies that engage in insurance agency business as a sideline.

Article 118: An insurance brokerage is an institution that, based upon the interests of the proposer, provides intermediary services for the conclusion of an insurance contract between the proposer and insurer, and that charges a commission fee in accordance with the law.

Article 119: An insurance agency or brokerage shall possess the qualifications specified by the State Council's insurance regulatory authority, or obtain a permit to engage in insurance agency business or an insurance brokerage business licence issued by the insurance regulatory authority.

A dedicated insurance agency or an insurance brokerage shall carry out registration procedures with, and collect its business licence from, the administration for industry and commerce on the strength of its permit issued by the insurance regulatory authority.

A non-dedicated insurance agency shall carry out amendment of registration procedures with the administration for industry and commerce on the strength of its permit issued by the insurance regulatory authority.

Article 120: The provisions of thePRC Company Law on minimum registered capital shall apply to a dedicated insurance agency or an insurance brokerage established in the form of a company.

The State Council's insurance regulatory authority may, based on the scope of business and size of dedicated insurance agencies and insurance brokerages, adjust their minimum registered capital provided that the same is not lower than the limit specified in the PRC Company Law.

The registered capital of, or capital contributions to, a dedicated insurance agency or an insurance brokerage must be paid-in monetary capital.

Article 121: The senior management personnel of a dedicated insurance agency or an insurance brokerage shall be of good conduct, be familiar with insurance laws and administrative regulations, have the operation and management capabilities required to perform their duties and have obtained, before taking up their positions, approval of their qualifications for their positions from the insurance regulatory authority.

Article 122: Individual insurance agents, practising personnel of insurance agencies and practising personnel of insurance brokerages shall satisfy the qualification conditions specified by the State Council's insurance regulatory authority and have a qualification certificate issued by the insurance regulatory authority.

Article 123: Insurance agencies and insurance brokerages shall have their own places of business and keep dedicated account books for recording the receipts and expenditures relating to insurance agency or brokerage business.

Article 124: An insurance agency or insurance brokerage shall deposit a security bond or take out professional liability insurance in accordance with the provisions of the State Council's insurance regulatory authority. An insurance agency or insurance brokerage may not use its security bond without the approval of the insurance regulatory authority.

Article 125: An individual insurance agent may not concurrently accept appointment from more than one insurer when handling life insurance business on an agency basis.

Article 126: When engaging an insurance agent to handle insurance business on its behalf, an insurer shall conclude an agency agreement with the insurance agent specifying, in accordance with the law, the rights and obligations of both parties.

Article 127: An insurer shall bear the liability for acts of an insurance agent when handling insurance business on behalf of the insurer in accordance with the insurer's authorisation.

If an insurance agent, in the absence of authorisation, or by exceeding its authorisation or after the termination of its authorisation, enters into a contract in the name of the insurer, thereby giving the proposer reason to believe that its has such authorisation, such agency act shall be valid. The insurer may pursue, in accordance with the law, liability of the insurance agent that acted ultra vires.

Article 128: If an insurance brokerage causes a proposer or the insured to incur a loss due to negligence, it shall be liable for compensation.

Article 129: The parties to an insurance activity may engage an insurance assessor or other such lawfully established independent assessor or a person with the relevant professional knowledge to appraise and assess an insured event.

The organisation or individual engaged to appraise or assess the insured event shall do so in a lawful, independent, objective and impartial manner, and no work unit or individual may interfere in such appraisal or assessment.

If the organisation or individual mentioned in the preceding paragraph causes the insurer or the insured to incur a loss due to a deliberate act or negligence, it/he/she shall be liable for compensation in accordance with the law.

Article 130: Insurance commission fees shall be paid only to lawfully qualified insurance agents or brokerages, and may not be paid to any other parties.

Article 131: An insurance agent, or insurance brokerage or its practising personnel may not commit any of the following acts in the course of its or their business activities:

(1) defrauding the insurer, proposer, insured or beneficiary;

(2) concealing important circumstances pertinent to the insurance contract;

(3) hindering the proposer from performing, or inducing the proposer not to perform, its/his/her obligation of disclosure as specified herein;

(4) offering or promising to offer other benefits not specified in the insurance contract to the proposer, insured or beneficiary;

(5) exploiting administrative power, position or occupational advantages, or using other improper means to force a proposer to conclude an insurance contract, or entice it/him/her into or restrict it/him/her from concluding such contract;

(6) forging an insurance contract or amending the same without authorisation, or providing fraudulent supporting documentation for the parties to the contract;

(7) diverting, retaining or misappropriating insurance premiums or insurance proceeds;

(8) exploiting business advantages to seek illegitimate gains for another organisation or individual;

(9) colluding with a proposer, the insured or the beneficiary to obtain insurance proceeds by fraud; or

(10) divulging the trade secrets of the insurer, proposers or insured learnt in the course of business activities.

Article 132: The division, merger or change in organisational form of, the establishment of a (sub-) branch by, and the dissolution of, a dedicated insurance agency or an insurance brokerage shall be subject to the approval of the insurance regulatory authority.

Article 133: The first paragraph of Article 86 and Article 113 hereof shall apply to insurance agencies and brokerages.

Part Six: Oversight of the insurance industry

Article 134: An insurance regulatory authority shall oversee the insurance industry, safeguard the order of the insurance market and protect the lawful rights and interests of proposers, insured and beneficiaries in accordance with this Law, within the purview specified by the State Council and in compliance with the principles of lawfulness, transparency and impartiality.

Article 135: The State Council's insurance regulatory authority shall formulate and issue rules on the oversight of the insurance industry in accordance with laws and administrative regulations.

Article 136: Insurance terms and insurance premium rates for types of insurance that are of an immediate interest to the public, types of insurance that are mandatory in accordance with the law and newly-developed types of life insurance shall be submitted to the State Council's insurance regulatory authority for approval. When conducting its examination and granting its approval, the State Council's insurance regulatory authority shall comply with the principles of protecting the public interest and guarding against unfair competition. The insurance terms and insurance premium rates for other types of insurance shall be submitted to the insurance regulatory authority for the record.

The specific measures for the examination, approval and record filing of insurance terms and insurance premium rates shall be formulated by the State Council's insurance regulatory authority based on the preceding paragraph.

Article 137: If the insurance terms or insurance premium rates used by an insurance company violate laws, administrative regulations or relevant provisions of the State Council's insurance regulatory authority, the insurance regulatory authority shall order the insurance company to cease using the same or revise the same within a specified period of time. If the circumstances are serious, it may ban the insurance company from filing new insurance terms and premium rates for a certain period of time.

Article 138: The State Council's insurance regulatory authority shall establish a sound system for regulation of the solvency of insurance companies to monitor the solvency of insurance companies.

Article 139: If an insurance company has inadequate solvency, the State Council's insurance regulatory authority shall place it on a watch list and may, depending on the specific circumstances, take the following measures:

(1) order it to increase its capital, or arrange for reinsurance;

(2) restrict its scope of business;

(3) restrict its distribution of dividends to shareholders;

(4) restrict its purchase of fixed assets or place restrictions on the scale of its operating expenses;

(5) restrict the manner in which it applies its capital and the percentage thereof;

(6) restrict its establishment of additional (sub-) branches;

(7) order it to auction bad assets and/or transfer insurance business;

(8) place restrictions on the salary level of its directors, supervisors and senior management personnel;

(9) place restrictions on its commercial advertising; and/or

(10) order it to cease accepting new business.

Article 140: If an insurance company fails to allocate or carry over funds to its various liability reserves in accordance herewith, or to arrange for reinsurance in accordance herewith, or seriously violates the provisions hereof on the application of capital, the insurance regulatory authority shall order it to correct the matter within a specified period of time and may order it to replace the person in charge and relevant management personnel.

Article 141: If after the insurance regulatory authority has, in accordance with Article 140 hereof, rendered a decision on correction within a specified period of time, the insurance company does not do so within the specified period of time, the State Council's insurance regulatory authority may make a decision to select and appoint insurance professionals and designate relevant personnel of the insurance company to form a rectification team to carry out rectification of the company.

The rectification decision shall state the name of the company under rectification, cause for rectification, members of the rectification team and the time limit for the rectification, and shall be announced.

Article 142: The rectification team shall have the right to oversee the day-to-day business of the insurance company undergoing rectification. The person in charge and the relevant management personnel of the company undergoing rectification shall exercise their functions and powers under the supervision of the rectification team.

Article 143: An insurance company undergoing rectification shall continue to engage in its existing business during the rectification period. However, the State Council's insurance regulatory authority may order the company undergoing rectification to cease engaging in a part of its existing business or to cease accepting new business and make revisions to the application of its capital.

Article 144: If an insurance company undergoing rectification, following the rectification, has remedied its violation hereof and resumed its normal operations, the rectification team shall submit a report, the rectification shall conclude once the State Council's insurance regulatory authority gives its approval, and the State Council's insurance regulatory authority shall make an announcement to that effect.

Article 145: The State Council's insurance regulatory authority may take over an insurance company if:

(1) the company's solvency is seriously deficient; or

(2) the company violates this Law and such violation harms the public interest and could or has seriously jeopardised the company's solvency.

The claims relationships and debts relationships of an insurance company that has been taken over shall not change as a result of the takeover.

Article 146: The constitution of the takeover team and implementing measures for the takeover shall be decided by the State Council's insurance regulatory authority and shall be announced.

Article 147: The State Council's insurance regulatory authority may make a decision to extend the takeover period upon its expiration; however the maximum takeover period may not exceed two years.

Article 148: If the insurance company being taken over has been restored to its normal capacity for operations at the expiration of the takeover period, the State Council's insurance regulatory authority shall make a decision to terminate the takeover and announce the same.

Article 149: If the circumstances specified in Article 2 of the PRC Enterprise Bankruptcy Law apply to an insurance company that is undergoing rectification or that has been taken over, the State Council's insurance regulatory authority may apply to a people's court in accordance with the law for the restructuring or bankruptcy liquidation of said insurance company.

Article 150: If an insurance company has its permit to engage in insurance business revoked as a result of illegal operations or if its solvency is inferior to the standard set by the State Council's insurance regulatory authority and not closing down such company would seriously jeopardise the order of the insurance market and/or harm the public interest, the State Council's insurance regulatory authority shall close it down, announce the same and constitute a liquidation committee in a timely manner in accordance with the law to liquidate it.

Article 151: The State Council's insurance regulatory authority shall have the right to demand that the shareholders and de facto controller(s) of an insurance company provide relevant information and data within a specified period of time.

Article 152: If a shareholder of an insurance company uses affiliated transactions to seriously harm the company's interests, jeopardising its solvency, the State Council's insurance regulatory authority shall order it to rectify the matter. Until it effects rectification as required, the State Council's insurance regulatory authority may place restrictions on its shareholder rights. If the shareholder refuses to rectify the matter, the State Council's insurance regulatory authority may order it to transfer the equity it holds in the insurance company.

Article 153: As required to perform its oversight duties, an insurance regulatory authority may have a regulatory discussion with the directors, supervisors and senior management personnel of an insurance company and ask them to provide an explanation of material matters of the company's business activities and risk management.

Article 154: When an insurance company is undergoing rectification, has been taken over or is undergoing liquidation after being closed down or when a material risk arises, the State Council's insurance regulatory authority may take the following measures against the directors, supervisors and senior management personnel who are directly in charge of the company and other directly responsible persons:

(1) notify the exit control authorities to prevent, in accordance with the law, them leaving the country; and

(2) apply to the judicial authorities to prohibit them from removing elsewhere, transferring or otherwise disposing of property, or encumbering other rights to property.

Article 155: In performing its duties in accordance with the law, an insurance regulatory authority may take the following measures:

(1) conduct onsite inspections of insurance companies, insurance agencies, insurance brokerages, insurance asset management companies and representative offices of foreign insurance institutions;

(2) enter premises where a violation of the law is suspected of having occurred to investigate and gather evidence;

(3) question concerned parties, and questioning work units and individuals that have a connection with the event being investigated and require them to give an explanation of matters relating to the event being investigated;

(4) review and take copies of information such as property title registrations that have a connection with the event being investigated;

(5) review and take copies of the financial accounting information and other relevant documents and information of insurance companies, insurance agencies, insurance brokerages, insurance asset management companies and representative offices of foreign insurance institutions and of work units and individuals that have a connection with the event being investigated; seal documents and information that could be removed elsewhere, concealed or destroyed;

(6) check the bank accounts of insurance companies, insurance agencies, insurance brokerages, insurance asset management companies and representative offices of foreign insurance institutions that are suspected of having operated in violation of the law and work units and individuals that have a connection with the suspected violation of the law; and

(7) where there is evidence that implicated property, such as unlawful funds, has been or could be removed elsewhere or concealed, or there is evidence that important evidence has been or could be concealed, fabricated or destroyed, subject to the approval of the person in charge of the insurance regulatory authority, apply to a people's court for the freezing or placement under seal thereof.

If an insurance regulatory authority is to take the measures set forth in Item (1), (2) or (5) of the preceding paragraph, it shall require the approval of the person in charge of the insurance regulatory authority. If it is to take the measure set forth in Item (6), it shall require the approval of the person in charge of the State Council's insurance regulatory authority.

When an insurance regulatory authority is conducting a monitoring inspection or investigation in accordance with the law, its inspectors or investigators may not be fewer than two and they shall present their credentials and the monitoring inspection or investigation notice. If there are fewer than two inspectors or investigators or if they fail to present their credentials and the monitoring inspection or investigation notice, the work unit or individual being inspected or investigated shall have the right to refuse such monitoring inspection or investigation.

Article 156: When an insurance regulatory authority is carrying out its duties in accordance with the law, the work unit or individual being inspected or investigated shall co-operate therewith.

Article 157: The members of the working personnel of an insurance regulatory authority shall be devoted to their duties, handle matters in accordance with the law, be impartial, be of high integrity, may not use the advantages of their positions to seek improper gains and may not divulge the trade secrets of relevant work units and individuals to which they have been privy.

Article 158: The State Council's insurance regulatory authority shall establish with the People's Bank of China and other financial regulatory authorities of the State Council a mechanism for the sharing of regulatory information.

When an insurance regulatory authority is carrying out its duties in accordance with the law by conducting a monitoring inspection or investigation, relevant departments shall co-operate therewith.

Part Seven: Legal liability

Article 159: If this Law is violated by establishing an insurance company or insurance asset management company without authorisation, or by unlawfully engaging in commercial insurance business, the insurance regulatory authority shall shut down such operations, confiscate the illegal income and impose a fine of not less than the amount of and not more than five times the illegal income. If there is no illegal income or if the illegal income is less than Rmb200,000, it shall impose a fine of not less than Rmb200,000 and not more than Rmb1 million.

Article 160: If this Law is violated by establishing a dedicated insurance agency or insurance brokerage without authorisation, or by engaging in insurance agency business or insurance brokerage business without a permit to engage in insurance agency business or insurance brokerage business, the insurance regulatory authority shall shut down such operations, confiscate the illegal income and impose a fine of not less than the amount of and not more than five times the illegal income. If there is no illegal income or if the illegal income is less than Rmb50,000, it shall impose a fine of not less than Rmb50,000 and not more than Rmb300,000.

Article 161: If an insurance company violates this Law by operating beyond its approved scope of business, the insurance regulatory authority shall order it to correct the matter within a specified period of time, confiscate its illegal income and impose a fine of not less than the amount of and not more than five times the illegal income; if there is no illegal income or if the illegal income is less than Rmb100,000, it shall impose a fine of not less than Rmb100,000 and not more than Rmb500,000. If it fails to carry out a correction of the matter by the specified period of time or causes serious consequences, the insurance regulatory authority shall order it to suspend operations and undergo rectification, or revoke its business permit.

Article 162: If an insurance company commits any of the acts set forth in Article 116 hereof, the insurance regulatory authority shall order it to correct the matter and impose a fine of not less than Rmb50,000 and not more than Rmb300,000. If the circumstances are serious, the insurance regulatory authority shall place restrictions on its scope of business, order it to cease accepting new business or revoke its business permit.

Article 163: If an insurance company violates Article 84 hereof, the insurance regulatory authority shall order it to correct the matter and impose a fine of not less than Rmb10,000 and not more than Rmb100,000.

Article 164: If an insurance company violates this Law by committing either of the following acts, the insurance regulatory authority shall order it to correct the matter and impose a fine of not less than Rmb50,000 and not more than Rmb300,000:

(1) offering over-insurance in serious circumstances; or

(2) insuring a person without capacity for civil acts and stipulating death as a condition for payment of insurance benefits.

Article 165: If this Law is violated by the committing of any of the following acts, the insurance regulatory authority shall order a correction of the matter and impose a fine of not less than Rmb50,000 and not more than Rmb300,000; if the circumstances are serious, the insurance regulatory authority may place restrictions on the scope of business, order cessation of the acceptance of new business, or revoke the business permit:

(1) failure to deposit a security bond in accordance with provisions or use of such security bond in violation of provisions;

(2) failure to allocate or carry over funds to its various liability reserves in accordance with provisions;

(3) failure to make contributions to the insurance security fund or allocations to the common reserve in accordance with provisions;

(4) failure to reinsure an insurance in accordance with provisions;

(5) failure to use insurance company funds in accordance with provisions;

(6) establishment of a (sub-) branch or representative office without approval; or

(7) failure to apply for approval of insurance terms and premium rates in accordance with provisions.

Article 166: If an insurance agency or an insurance brokerage commits any of the acts set forth in Article 131 hereof, the insurance regulatory authority shall order it to rectify the matter and impose a fine of not less than Rmb50,000 and not more than Rmb300,000. If the circumstances are serious, the insurance regulatory authority shall revoke its business permit.

Article 167: If an insurance agency or an insurance brokerage violates this Law by committing either of the following acts, the insurance regulatory authority shall order it to correct the matter and impose a fine of not less than Rmb20,000 and not more than Rmb100,000; if the circumstances are serious, the insurance regulatory authority shall order it to suspend operations and undergo rectification or revoke its business permit:

(1) failure to deposit a security bond or take out professional liability insurance in accordance with provisions; or

(2) failure, in accordance with regulations, to keep dedicated account books to record its business receipts and expenditures.

Article 168: If a dedicated insurance agency or an insurance brokerage violates this Law by establishing a (sub-) branch or by changing its organisational form without approval, the insurance regulatory authority shall order it to correct the matter and impose a fine of not less than Rmb10,000 and not more than Rmb50,000.

Article 169: If this Law is violated by engaging personnel who do not have the qualifications for their position, or practice qualifications, the insurance regulatory authority shall order a correction of the matter and impose a fine of not less than Rmb20,000 and not more than Rmb100,000.

Article 170: If this Law is violated by transferring, leasing out or lending out a business permit, the insurance regulatory authority shall impose a fine of not less than Rmb10,000 and not more than Rmb100,000. If the circumstances are serious, the insurance regulatory authority shall order a suspension of operations to undergo rectification or revoke the business permit.

Article 171: If this Law is violated by the committing any of the following acts, the insurance regulatory authority shall order a correction of the matter within a specified period of time; and if a correction is not carried out by the specified period of time, it shall impose a fine of not less than Rmb10,000 and not more than Rmb100,000:

(1) failure to submit or keep reports, statements, documents or information in accordance with regulations, or failure to provide relevant information or data in accordance with provisions;

(2) failure to submit insurance terms or premium rates for the record in accordance with provisions; or

(3) failure to disclose information in accordance with provisions.

Article 172: If this Law is violated by the committing of any of the following acts, the insurance regulatory authority shall order a correction of the matter and impose a fine of not less than Rmb100,000 and not more than Rmb500,000; if the circumstances are serious, the insurance regulatory authority may place restrictions on the scope of business, order cessation of the acceptance of new business or revoke the business permit:

(1) preparation or provision of fraudulent reports, statements, documents or information;

(2) refusal of, or interference with, a legal monitoring inspection; or

(3) failure to use approved or recorded insurance terms or premium rates in accordance with provisions.

Article 173: If an insurance company, insurance asset management company, dedicated insurance agency or insurance brokerage violates this Law, the insurance regulatory authority shall, in addition to imposing penalties thereon in accordance with Articles 161 to 172 hereof as applicable, give its supervisors directly in charge and other directly responsible persons a warning and fine them not less than Rmb10,000 and not more than Rmb100,000; if the circumstances are serious, it shall revoke their qualifications for their positions or their practice qualifications.

Article 174: If an individual insurance agent violates this Law, the insurance regulatory authority shall give him/her a warning and may fine him/her up to Rmb20,000; if the circumstances are serious, it shall fine him/her not less than Rmb20,000 and not more than Rmb100,000 and may revoke his/her qualification certificate.

If a person without lawful qualifications engages in individual insurance agent activities, the insurance regulatory authority shall give him/her a warning and may fine him/her up to Rmb20,000; if the circumstances are serious, it shall fine him not less than Rmb20,000 and not more than Rmb100,000.

Article 175: If a foreign insurance institution establishes a representative office in the People's Republic of China without the approval of the State Council's insurance regulatory authority, the State Council's insurance regulatory authority shall shut it down and impose a fine of not less than Rmb50,000 and not more than Rmb300,000.

If a representative office established in the People's Republic of China by a foreign insurance institution engages in insurance business activities, the insurance regulatory authority shall order a correction of the matter, confiscate the illegal income and impose a fine of not less than the amount of and not more than five times the illegal income; if there is no illegal income or if the illegal income is less than Rmb200,000 it shall impose a fine of not less than Rmb200,000 and not more than Rmb1,000,000. It may order that the chief representative be replaced. If the circumstances are serious, it shall close the office down.

Article 176: If a proposer, the insured or beneficiary commits any of the following acts and the insurance fraud activity engaged in by it/him/her is not sufficient to constitute a criminal offence, it/he/she shall be subjected to administrative penalties in accordance with the law:

(1) the proposer deliberately creates a fictitious subject matter of insurance so as to fraudulently obtain insurance proceeds;

(2) he/she fabricates an insured event that did not occur, or fabricates false reasons for an event or overstates the extent of the loss so as to fraudulently obtain insurance proceeds; or

(3) he/she wilfully causes an insured event so as to fraudulently obtain insurance proceeds.

If an assessor, appraiser or attester of an insured event deliberately provides false supporting documentation to create the conditions for the proposer, the insured or the beneficiary to commit insurance fraud, it/he/she shall be penalised in accordance with the preceding paragraph.

Article 177: If a third party is caused to incur damage due to a violation of this Law, civil liability shall be borne in accordance with the law.

Article 178: If the lawful exercise by an insurance regulatory authority and its working personnel of their right to conduct a monitoring inspection or investigation in accordance with the law is refused or hindered, public security control penalties shall be imposed if violence or intimidation was not used.

Article 179: If a law or administrative regulation is violated and the circumstances are serious, the State Council's insurance regulatory authority may ban the relevant responsible persons from the insurance industry for a certain period of time up to life.

Article 180: A member of the personnel of an insurance regulatory authority who is involved in oversight work shall be sanctioned in accordance with the law if:

(1) he/she violates regulations in approving the establishment of an organisation;

(2) he/she violates regulations in approving insurance terms or insurance premium rates;

(3) he/she violates regulations in conducting an onsite inspection;

(4) he/she violates regulations in checking an account or freezing funds;

(5) he/she divulges trade secrets of a relevant work unit or individual to which he/she is privy;

(6) he/she violates provisions in imposing administrative penalties; or

(7) he/she commits another act of abuse of his authority or dereliction of his/her duties.

Article 181: If a violation of this Law constitutes a criminal offence, criminal liability shall be pursued in accordance with the law.

Part Eight: Supplementary Provisions

Article 182: An insurance company shall join an insurance association. An insurance agency, insurance brokerage or insurance assessor may join an insurance association.

An insurance association is an organisation responsible for the self-regulation of the insurance industry and is an association with legal personality.

Article 183: This Law shall govern the commercial insurance business engaged in by insurance organisations, other than insurance companies, that are established in accordance with the law.

Article 184: Relevant provisions of the PRC Maritime Law shall apply to marine insurance. For matters not covered by the PRC Maritime Law, relevant provisions of this Law shall apply.

Article 185: This Law shall apply to Sino-foreign equity joint insurance companies, wholly foreign-owned insurance companies, and branch companies of foreign insurance companies; however, where other laws or administrative regulations provide otherwise, such provisions shall prevail.

Article 186: The state supports the development of insurance business for agricultural production services. Agricultural insurance shall be separately provided for by laws or administrative regulations.

If laws or administrative regulations provide otherwise in respect of mandatory insurance, such provisions shall apply.

Article 187: This Law shall be effective as of October 1 2009.