Laws of the People's Republic of China

Circular of China Insurance Regulatory Commission on Reinforcing the Information Disclosure of the Reinsurance Transactions between Foreign-funded Insurance Companies and The Associated Enterprises Thereof

Bao Jian Fa [2006] No. 116

Each foreign-funded insurance company:

For the purpose of reinforcing the supervision and administration of the reinsurance transactions between foreign-funded insurance companies and the associated enterprises thereof, this Commission determines to further enhance the requirements on related information disclosure. We hereby inform the concrete items as follows:

1.

In case a foreign-funded insurance company conducts transactions of facultative reinsurance (including facultative obligatory reinsurance) with its associated enterprises, it shall, within 30 days as of the end of each quarter, report to China Insurance Regulatory Commission each transaction of facultative reinsurance becoming effective within the quarter. Such items shall be included:

(1)

Processes of the inquiries and its opponents' offers;

(2)

Reasons for selecting these associated enterprises;

(3)

Main reinsurance terms, containing the insurance products involved, the risk station of the insurance objects, reinsurance form, as well as the premium ceded in or out;

(4)

Explanation on whether the insurance liabilities assumed by the ceding party and the ceded party are similar;

(5)

Amount of the premium ceded in or out, payment mode and amount of commission charge for a proportional reinsurance; and

(6)

Arrangement of each the proportional reinsurance in relation to a nonproportional reinsurance.

2.

In case a foreign-funded insurance company has any transaction of contract reinsurance with any of its affiliated enterprises, it shall, within three months since the day when the contract becomes effective, report it to China Insurance Regulatory Commission. The following items shall be included:

(1)

Processes of the inquiries and its opponents' offers ;

(2)

Reasons for selecting this associated enterprise;

(3)

Main reinsurance terms, containing the insurance products involved and the reinsurance form;

(4)

Amount and payment mode of commission charge for a proportional reinsurance, the calculating method and payment mode for profit commission;

(5)

As regards a proportional reinsurance, where the insurance liabilities assumed by the ceding party and the ceded party are not similar, a pricing report signed by a liable actuary or provided by a third party (such as an actuarial consultation company, similar as follows) shall be provided, which shall contain the insurance liabilities of both the ceding party and the ceded party, the pricing of the original guarantee slip as well as the pricing of the reinsurance;

(6)

As regards a nonproportional insurance, a pricing report signed by a liable actuary or provided by a third party shall be provided.

As regards Items (5) and (6) of this Article, where any of the following conditions is met, it is only necessary to report the price of the contract reinsurance and the quota of the reinsurer:

(a)

the associated party is not the top reinsuerer of the contract;

(b)

the quota held by the associated party in the contract dose not exceed 50%, as regards a multilayer nonproportional contract, the quota held by the associated party in each layer dose not exceed 50%.

3.

As regards a transaction of contract reinsurance between a foreign-funded insurance company and any of its associated enterprise, the following contents shall, in light of different accounting methods, be reported:

(1)

As regards a transaction of contract reinsurance of health insurance, accident insurance or life insurance (excluding YRT) conducted on a business year basis, the insurance period of the original guarantee slip on long-term health insurance, long-term accident insurance or long-term life insurance shall be reported;

(2)

As regards a transaction of contract reinsurance (excluding excess of loss reinsurance per risk and per accident) conducted on an accident year basis, the undue liability reserve report related to this contract and signed by a liable actuary or provided by a third party shall be provided, which shall contain the preparation method and the transfer-in amount of the undue liability reserve;

(3)

As regards a transaction of contract reinsurance conducted on the basis of accounting year, the undue liability reserve report and the outstanding loss reserve report related to this contract and signed by a liable actuary or provided by a third party shall be provided, which shall contain the preparation method and the transfer-in amount of the undue liability reserve and that of the outstanding loss reserve.

4.

As regards a reinsurance mode under which the ceding company draws some or all reserves that ought to be drawn by the ceded company, the following contents shall also be reported, in addition to the contents provided for in Article 1 or 2:

(1)

Hypothetical interest rate based on which the pricing of the original guarantee slip is made; and

(2)

Interest rate of the reserves drawn by the ceding company.

5.

A foreign-funded insurance company shall report to China Insurance Regulatory Commission the written and electronic documents of the Quarterly Statistics of the Reinsurance Transactions Between Foreign-funded Insurance Companies and the Associated Enterprise Thereof within 30 days as of the end of each quarter. The Statistics shall list each transactions conducted from the beginning of the year till the end of the said quarter and separately list the transactions conducted with each associated enterprise.

6.

A foreign-funded insurance company shall report to China Insurance Regulatory Commission the written and electronic documents of the Anual Statistics of the Reinsurance Transactions Between Foreign-funded Insurance Companies and the Associated Enterprise Thereof prior to April 30 each year. The Statistics shall list each transactions conducted in the preceding two years and separately list the transactions conducted with each associated enterprise.

7.

A reinsurance transaction approved by China Insurance Regulatory Commission shall be strictly according to the related requirements of the Provisions on Administrating Reinsurance Business (Decree No.2, 2005 of China Insurance Regulatory Commission).

8.

The term "foreign-funded insurance company" as referred to in the present Circular means the solely foreign-funded insurance companies, Chinese and foreign equity joint insurance companies and branches of foreign insurance companies that are set up or operate within the territory of China upon approval and according to the related laws and administrative regulations of the People's Republic of China.

9.

The present Circular shall go into effect as of January 1, 2007. Where any previous provision of China Insurance Regulatory Commission concerning the associated reinsurance transactions of foreign-funded insurance companies conflicts with the present Circular, the latter shall prevail.

Affix:

1.

Quarterly Statistics of the Reinsurance Transactions Between Foreign-funded Insurance Companies and the Associated Enterprise Thereof (omitted )

2.

Annual Statistics of the Reinsurance Transactions Between Foreign-funded Insurance Companies and the Associated Enterprise Thereof (omitted )

The China Insurance Regulatory Commission

Nov. 17, 2006