Laws of the People's Republic of China

The State Administration of Foreign Exchange, China Insurance Regulatory Commission

Circular of the State Administration of Foreign Exchange and China Insurance Regulatory Commission on the Relevant Issues Concerning the Administration of Sale and Payment of Foreign Exchange in Overseas Reinsurance Ceding

HuiFa [2003] No.75

June 20, 2003

The branches and departments of foreign exchange administration of the State Administration of Foreign Exchange (SAFE) in the provinces, autonomous regions, and municipalities directly under the Central Government, the branches in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo; the designated foreign exchange banks; and the insurance companies:

In order to implement the Interim Provisions on the Foreign Exchange Administration of Insurance Services, to regulate the reinsurance made in foreign exchange, and to effectively disperse insurance risks, the following circular is hereby made concerning the relevant matters of the administration of sale and payment of foreign exchange in overseas reinsurance ceding:

1.

The domestic Chinese-invested insurance companies, Sino-foreign equity joint insurance companies, and branches of foreign insurance companies in China (hereinafter referred as domestic insurance companies) that engage in overseas reinsurance ceding upon ratification by the SAFE may, pursuant to the relevant provisions of China Insurance Regulatory Commission (CIRC), undertake overseas reinsurance ceding of domestic insurances, and go through the formalities for purchase and payment of foreign exchange under overseas reinsurance ceding pursuant to the provisions hereof. Branches of domestic insurance companies may not go through the formalities for purchase and payment of foreign exchange under overseas reinsurance ceding.

2.

Where a domestic insurance company reinsured overseas any domestic insurance made in foreign exchange, that company shall, by taking with it the valid proofs, such as reinsurance bill or reinsurance payment list, etc., make the reinsurance payments from its foreign exchange operation account with a domestic commercial bank, and may not purchase any foreign exchange to make the payment.

3.

Where a domestic insurance company reinsured overseas any insurance made in RMB, it may, by taking with it the valid proofs, such as the reinsurance bill or reinsurance payment list, etc., make the reinsurance payment from its foreign exchange operation account with a domestic commercial bank; either may it, pursuant to Articles 4 through 7 hereof, apply to SAFE, and purchase foreign exchange to make the reinsurance payment with a designated foreign exchange bank on the strength of the ratification document of the SAFE.

4.

Where a domestic insurance company makes overseas excess of loss ratio reinsurance of any of its insurance made in RMB, it may apply for purchasing foreign exchange to make the reinsurance payment according to the actual business needs.

5.

Where a domestic insurance company make overseas reinsurance through contract or temporarily of the enterprise property insurance, freight insurance, ship insurance, aviation insurance, space insurance, oil insurance, energy insurance, construction and installment project insurance, liability insurance, nuclear station insurance, or any other type of insurance ratified by the CIRC that are made in RMB, that insurance company may apply to the SAFE for purchasing foreign exchange to make the reinsurance payment if either of the following conditions is satisfied:

(1)

The maximum insurance liability for a single insurance contract exceeds RMB50m;

(2)

The accumulative RMB premium income for a single insurance type exceeds the sum of the capital and the accumulation fund of that company.

6.

Where a domestic insurance company meets the conditions for purchasing foreign exchange under overseas reinsurance specified in Articles 4 and 5, that company shall file the application with SAFE on a quarterly basis by taking with it the relevant documents, such as the application for purchase of foreign exchange, the relevant insurance contracts or insurance data statistics, the audited balance sheet and profit statement of the company of the previous year, the copy of the License for Foreign Exchange Services, etc. A once-and-only application shall be filed with the SAFE with respect to any reinsurance contract for which the payment is made by installments. In the application for purchase of foreign exchange, the insurance company shall respectively specify the amount of foreign exchange purchased for excess of loss ratio reinsurances and contracts, and for temporary reinsurances.

7.

Where the application for purchase of foreign exchange under overseas reinsurance has been ratified by the SAFE, the domestic insurance company shall, when paying for the overseas reinsurance to overseas, make the payment with the designated foreign exchange bank through purchase of foreign exchange on the strength of the valid proofs, such as the ratification document of SAFE, and the reinsurance bill or reinsurance payment list, etc.

8.

A domestic insurance company shall fill out the "Quarterly Statements of Foreign Exchange Services of Insurance Company" in an accurate and timely manner (see HuiFa [2003] No.27), and shall indicate in the "Remarks" the overseas reinsurance operations of the previous quarter; in the case of payment by purchase of foreign exchange, the amount of foreign exchange purchased, the time of purchase and the bank for purchase, etc., shall be specified.

9.

This Circular shall enter into force as of July 1, 2003.

Upon receipt of this Circular, the branches shall transmit it as soon as possible to the insurance companies and designated foreign exchange banks within their respective jurisdictions; and the Chinese-funded designated foreign exchange banks shall transmit it as soon as possible to their respective branches and sub-branches. Please promptly report any problem encountered in the execution to the SAFE and the CIRC.