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Regulation of foreign insurance companies PDF

Regulation of foreign insurance companies

Foreign companies continue to show interest in expanding their activities in the territory of the people's Republic of China. However, to date, there are quite strict restrictions associated with the activities of foreign insurers in China.

The body responsible for managing insurance companies, including those with foreign capital, is the people's Bank of China. The right to carry out the current management is granted to its office in Shanghai.

According to the law of the PRC "on insurance" the order of organization and work of foreign insurers is determined by a set of legislative acts, the systematization and application of which is provided by the Council for supervision of foreign financial institutions of the People's Bank of China. The procedure for licensing the activities of foreign insurance companies is established in accordance with the Shanghai Rules on the work of foreign insurers. These Rules also apply to insurance companies registered in Hong Kong (Hong Kong), Macao (Macao), Taiwan.

The rules define the following requirements for foreign insurance companies that intend to start work in China:

– for at least three years, the company must be among the 100 largest companies in the world and have the appropriate international certificates;

- have experience in the international insurance markets and work in the markets of developed countries;

- to carry out activities authorized by the government of China in its designated territory;

- capital, profits, reserves and assets of foreign insurers should be available to the supervision of Chinese government authorities;

- have a representative office in China for at least three years;

- to create insurance organizations with participation of foreign capital.

Only if these requirements are met, the activities of insurance companies are protected by the laws of the PRC.

Under insurance organizations with foreign capital understand:

- branches of insurance companies in Shanghai, registered abroad in China (in accordance with the Provisional Rules referred to as " branches of foreign insurance companies»);

- insurance companies established in Shanghai by foreign insurers jointly with insurance companies registered in China or with insurance companies established by other financial institutions established after approval by the People's Bank of China ("joint insurance companies"). The formation of joint ventures with the participation of Chinese insurance companies is almost the only opportunity for foreign insurers to participate in the activities of the Chinese life insurance market and the implementation of reinsurance operations.

All participants in the creation of a joint insurance company shall:

- documents on the registered capital and the capital of each participant;

- the ratio of the shares of each party in the capital;

- list of types of insurance;

- basic contractual terms;

- method of calculation of tariffs;

- annual accounts or balance of payments of each participant for the last three years;

- draft agreement on joint venture signed by authorized representatives;

- draft Charter of the joint insurance company.

Companies that have declared the establishment of branches of foreign insurance companies are required to submit to the Head Department of the People's Bank of China information on the amount of guarantee capital, the subject of activity, annual reports or balance of payments for the last 3 years, a copy of the license for the activities issued by the competent authority of the country or territory of the location of the parent organization, a written guarantee of their parent organization for the performance of tax and debt obligations.

To ensure solvency, insurance companies with foreign capital must create a guarantee Fund, formed in the branch of the People's Bank of China in Shanghai, where 20% of the proceeds are deducted. In addition, the parent organization of the branch of the foreign new company, which will carry out life insurance and types other than life insurance at the same time, must invest $ 8 million in the guarantee Fund. If the office undertakes only one of these activities, the parent organization must invest $ 4 million as a guarantee.

Interest is accrued on the funds of the guarantee Fund. In accordance with the licensing rules of insurance companies with foreign capital participation, the people's Bank of China will issue an official application form to the applicant within three months after receiving the application for the intention to establish a joint insurance organization. However, if the official application form has not been received after this period, the statement of intent automatically becomes invalid.

After receiving the official application form from the insurance company within one month, the capital is checked and its registration is carried out, after which the organization can submit an application to the State administration for currency control for the issuance of a"license for foreign exchange operations".

In order to protect consumers of insurance services, the chief management personnel of insurance organizations with foreign capital participation are not allowed to hold positions in other commercial organizations. Specialists recognized by the Shanghai branch of the People's Bank of China and accountants registered in China may be employed as actuaries. The people's Bank of China and its Shanghai branch have the right to send authorized persons to insurance companies with foreign capital at any time to check their financial situation.

The objects of insurance may be the property of foreign enterprises operating within the country and their liability. Insurers with participation of foreign capital can also carry out operations on personal insurance of foreign and Chinese private persons paying premiums at their own expense; operations on reinsurance of risks of the above types of insurance.

If, for any reason, the joint insurance companies have not started insurance activities within 12 months, the authorization of the People's Bank of China automatically becomes invalid.

Insurance organizations with participation of foreign capital should form insurance reserves similar to those formed by national insurance companies. However, the requirements for the formation of these reserves are more stringent than for national insurers. Thus, the contribution reserve to be formed by life insurance companies should be formed by foreign insurers in the amount of the total value of long-term valid contracts and 50 % of the earned life insurance premiums for the reporting year. In addition, the value of long-term life insurance contracts must be reviewed and approved by actuaries authorized by the Shanghai branch of the People's Bank of China.

Provisions for long-term personal insurance should not be lower than the total amount of all current liabilities for insurance payments.

When carrying out insurance of types other than life insurance, the balance between own funds and real insurance obligations shall not be lower than the established value. In case of non-compliance with this standard, it is necessary to increase the capital.

For carrying out life insurance and types other than life insurance, at the same time reserve funds are formed separately.

All joint companies form a so-called General reserve Fund, which should be equal to 10 % of all assets remaining after payment of taxes, fees and stipulated deductions.

Like national insurance companies, foreign insurers are required to form a public benefit Fund and a development Fund. And only after that the remaining profit can be transferred abroad.

To ensure the financial stability of organizations with foreign capital in the implementation of insurance operations, the liability under insurance contracts other than life insurance should not exceed 10 % of the company's own funds. Liability exceeding the established limit is transferred to reinsurance.

A mandatory requirement is the reinsurance of 30 % of all liabilities in the people's insurance company of China (People's Insurance Company).

Insurance payments can be made only after the decision of the assessment Office (representative of the branch of the People's Bank of China), whose competence includes the inspection, assessment and determination of damage.

If the insurance organization with the participation of foreign capital was created without authorization. The people's Bank of China has the right to halt their activities, confiscate the illegal income and impose a fine.

It is prohibited to carry out practical insurance activities through representative offices. The law of the PRC" on insurance "article 86 States:" if the representative offices of insurance companies are engaged in insurance or Agency / brokerage work, the income received from this activity is recognized as illegal and withdrawn... the representative Offices are obliged to pay a fine. In case of more serious or repeated violations, the representative office is liquidated."

If insurance companies with foreign capital have gone beyond the scope of the approved subject of activity, the people's Bank of China and its Shanghai branch have the right to suspend the unapproved activity, seize their illegal income and collect a fine.

In the event of late reporting or failure to monitor and verify, the people's Bank of China and its Shanghai branch may charge a fine.

If insurance companies with foreign capital have committed other serious violations, the people's Bank of China can suspend the companies and even liquidate them.

 

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0 #1 Adam 2019-12-09 16:46
Regulation of foreign insurance companies
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