China Foreign Investment: Expert Q&A – Insurance Sector

Publication September 2019

The spotlight for this update is on the insurance sector

The first round of liberalisation policies in respect of China’s insurance sector were announced at the Boao Forum for Asia Annual Conference in 2018.  Since then, China has continued to implement legislation to liberalise foreign investment in its insurance industry.  The latest round of legislative developments have come into effect and liberalisation of foreign investment in the life insurance sector has been brought forward to 2020, signaling the Chinese Government’s commitment to attract foreign investment into China.

Here is a summary of the key foreign investment requirements that now apply to the insurance sector in China: 

  Insurers Professional insurance agents Insurance brokers Insurance asset managers
Is there any foreign shareholding restriction?
  • Property and casualty sector

No  up to 100% shareholding ownership is permitted

  • Life sector

Yes – currently limited to a maximum of 51%  but this restriction will be lifted and up to 100% shareholding will be permitted from 2020

No – up to 100% shareholding ownership is permitted No – up to 100% shareholding ownership is permitted Yes – currently limited to a maximum of 25% but this restriction will soon be lifted and up to 100% shareholding will be permitted 
Who can be a foreign shareholder?
  • Potentially open to all foreign institutions (subject to non-hard core qualification requirements)

It is no longer necessary for foreign investors to have operated an insurance business for at least 30 years. In addition,  regulatory decisions have also been made to remove the requirement for foreign investors to have had an insurance representative office in China for at least two years1

Foreign specialized insurance agency institutions that have engaged in insurance agency business for at least 3 years (subject to non-hard core qualification requirements)

It is no longer necessary to follow the strict qualification requirements set out under the CEPA2 regime so as to wholly own a professional insurance agent

Foreign specialised insurance brokerage institutions (subject to non-hard core qualification requirements)

Regulatory decisions have been made to remove the qualification requirement for foreign investors to have minimum total assets of US$200 million by the end of the last fiscal year.

The following qualification requirements for foreign investors will be removed soon:

  • having operated an insurance businessfor at least 30 years; and
  • having had an insurance representative office in China for at least two years3
Foreign insurance group company or insurance company (acting as the promoter) satisfying the following qualification requirements:
  • having operated an insurance business for at least 5 years;
  • minimum insolvency rate of 150%; and 
  • minimum total assets of RMB10 billion, or RMB15 billion in case of an insurance group company

What is the minimum capital contribution?

  • RMB200 million – limited scope of business
  • Life sector: RMB1.5 billion – all life business
  • Property  and casualty sector: RMB1 billion  all property and casualty business 
  • RMB50 million for new licence

 

 

 

 

 

  • RMB50 million for a new national license
  • RMB10 million for a new regional license at provincial level

 

 

 

  • RMB100 million (representing at least 0.1% of the amount of insurance funds under management)

 

 

 

Is approval from the China Banking and Insurance Regulatory Commission (CBIRC) required?

Yes – prior approval from CBIRC is required

 

Yes – approval from CBIRC is required after registration of the company Yes – approval from CBIRC is required after registration of the company

Yes – prior approval from CBIRC is required

 

Is the foreign investor able establish a branch in China? Yes – with prior approval from CBIRC  Yes – after notification to CBIRC  Yes – after notification to CBIRC  Yes – with prior approval from CBIRC 

 

What does this mean for your business?

  • More foreign investors (including financial intuitions that are non-insurance companies) will be able to invest in insurance companies in China.
  • Qualification requirements imposed on foreign investors will be largely removed or liberalised, so as to expedite the speed of opening up of foreign investment in the Chinese insurance sector.
  • From 2020, qualified foreign investors will be allowed to wholly own life insurance companies in China.
  • Foreign investors will soon also be allowed to wholly own insurance asset managers, allowing them to tap into the asset management business in China. 
  • Foreign insurance group companies will also be permitted to set up insurance institutions in China.

Footnotes

1   Although the relevant legislation has not yet been updated, we understand that the two-year representative office requirement has been lifted by the CBIRC in practice.

2   CEPA refers to the Mainland and Hong Kong Closer Economic Partnership Arrangement.

3   See footnote 1.


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