All change for foreign investment in the Chinese insurance sector

Global Publication November 2019

Following the first round of liberalization measures in the Chinese insurance sector, China has been developing legislation to open the sector further to foreign investment.

Following Premier Li Keqiang’s announcement at the 2019 Summer Davos Forum in July 2019, the 51 percent foreign shareholding restriction for life insurance companies will be fully lifted in 2020, one year earlier than originally planned.

We set out below some key aspects, in particular the legislative developments relevant to foreign invested insurers (FIE Insurers), foreign invested professional insurance agents (FIE PIAs), foreign invested insurance brokers (FIE Insurance Brokers) and foreign invested insurance asset management companies (FIE Insurance Asset Managers) that are likely to be of particular interest to foreign investors.

  FIE Insurers   FIE PIAs FIE Insurance Brokers   Insurance asset managers
Is there any foreign shareholding restriction?
  • Property and casualty sector: no, up to 100 percent shareholder ownership permitted.
  • Life sector: currently up to 51 percent and up to 100 percent from 2020  shareholder ownership permitted.

No, up to 100 percent  shareholding ownership is permitted.

 

 

 

No, up to 100 percent  shareholding ownership is permitted.

 

 

Yes – currently limited to a maximum of 25 percent but this restriction will soon be lifted and up to 100 percent shareholding will be permitted.

 

Who can be a foreign shareholder?

Potentially open to all foreign institutions (subject to some qualification requirements).

The requirement to have been involved in insurance business for at least 30 years has been removed.

Decisions have been made to remove the requirement to have had an insurance representative office in China for at least two years1 (we are still waiting for detailed rules on implementation)

Specialist foreign insurance agencies that have engaged in insurance intermediation for at least three years (subject to non-hard core qualification requirements)

It is no longer necessary to follow the strict qualification requirements set out under the CEPA2regime so as to wholly own an FIE PIA.

Specialist insurance brokerage institutions (subject to some qualification requirements)

The requirement to have minimum total assets amounting to USD200m by the end of the latest fiscal year has been removed.

Decisions have been made to remove the following qualification requirements (waiting for detailed rules to implement):

  • Having a practising insurance business for at least 30 years
  • Having established 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 five years;
  • minimum insolvency rate of 150 percent; and
  • minimum total assets of RMB10bn, or RMB15bn in case of an insurance group company
What is the minimum requirement on capital contribution?
  • RMB200m with limited scope of business
  • Life sector: RMB1.5bn enabling all life business
  • Property & casualty sector: RMB1bn enabling all property & casualty business
  • RMB50m for new 
    licence
  • RMB50m for new national licence
  • RMB10m for new regional license at provincial level
  • RMB100m (representing at least 0.1 percent of the amount of insurance funds under management)
Approval from CBIRC?4 Yes – prior approval from CBIRC is required Post approval from CBIRC, after the company registration Post approval from CBIRC, after the company registration Yes – prior approval from CBIRC is required
Is branch establishment permitted?  Yes, upon prior CBIRC approval  Yes, post reporting to CBIRC Yes, post reporting to CBIRC Yes – with prior approval from CBIRC

What does this mean for your business?

  • Foreign financial institutions, not limited to insurance companies, are permitted to invest into insurance companies in China.
  • Qualification requirements imposed on foreign investors will be largely removed or amended to speed up the opening up overseas investment in the Chinese insurance sector.
  • Following the liberalization of foreign investment in the Chinese property and casualty market, qualified foreign investors will soon be allowed to wholly-own life companies from 2020.
  • Foreign insurance groups 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.

4  

CBIRC refers to the China Banking and Insurance Regulatory Commission.



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