Laws of the People's Republic of China

China Insurance Regulatory Commission

Order of China Insurance Regulatory Commission

No.10

The Interim Measures for the Administration of Subordinated Term Debts of Insurance Companies, deliberated and adopted at the office meeting of the chairman of China Insurance Regulatory Commission on September 20, 2004, are hereby promulgated and shall come into force as of the date of promulgation.

Chairman of China Insurance Regulatory Commission Wu Dingfu

September 29, 2004

Interim Measures for the Administration of Subordinated Term Debts of Insurance Companies

Chapter I General Provisions

Article 1

With the view of regulating acts of insurance companies for their directional collection, transfer and repayment of principals and interests of subordinated term debts (hereinafter referred to as "subordinated debts") as well as information disclosure, and ensuring the solvency of insurance companies, the present Measures are formulated pursuant to the Company Law of the People's Republic of China, the Insurance Law of the People's Republic of China and the relevant laws and administrative regulations. .

Article 2

The "insurance companies" as mentioned in the present Measures shall refer to the Chinese funded insurance companies, Sino-foreign joint venture insurance companies and solely foreign owned insurance companies established within the territory of China according to the Chinese law.

Article 3

The "subordinated debts of an insurance company" as mentioned in the present Measures shall refer to the debts of an insurance company, which are collected directionally by the insurance company upon approval and whose time limit is five years or more. The repayment order of the principal and interests of subordinated debts is ranked after the liabilities in the insurance policy and other liabilities and before the share right capital of the insurance company.

Article 4

China Insurance Regulatory Commission (hereinafter referred to as the CIRC) shall according to law make supervision and administration on such acts of an insurance company as its directional collection, transfer, repayment of principals and interests of subordinated debts and information disclosure.

Article 5

The insurance company that collects subordinated debts directionally (hereinafter referred to as the "raiser") shall do management steadily to improve the solvency and protect the lawful rights and interests of the creditors of subordinated debts.

Chapter II Directional Collection

Article 6

When collecting subordinated debts directionally, an insurance company shall meet the conditions of the present Measures and report to the CIRC for examination and approval.

Article 7

When applying for directional collection of subordinated debts, an insurance company shall meet the following requirements:

1.

The audited net assets at the end of the latest year shall be not lower than 500 million Yuan;

2.

After collection, the accumulated amount of unpaid principals and interests of subordinated debts shall not exceed the un-audited net assets of the insurance company at the end of the latest year;

3.

The company has good corporate governance structure;

4.

The internal control system of the company is perfect and can be kept to strictly;

5.

The assets of the company are not impropriated by any natural person, juridical person or other organization and affiliated party that has actual control rights;

6.

The company has no acts in violation of laws and regulations in the last two years; and

7.

Other conditions as prescribed by the CIRC.

Article 8

The subordinated debts of an insurance company shall be collected directionally from qualified investors.

The "qualified investor" shall refer to the investor who has independent analysis capability and risk tolerance capability of purchasing subordinated debts, including domestic legal persons and overseas investors but excluding:

1.

Company under the control of a raiser; and

2.

Company under the control of the same third party with the raiser.

Article 9

The subordinated debts held by a single shareholder of the raiser and the controlling party of the shareholder shall not exceed 10% of the amount of collection in a single time or 10% of the accumulated amount, and the held proportion of the amount of collection for a single time or of the accumulated amount shall not be the highest. The accumulated subordinated debts held by all the shareholders of the raiser and the controlling party of all the shareholders shall not exceed 20% of the amount of collection for a single time or 20% of the accumulated amount of collection.

The proportions of subordinated debts mutually held by any insurance company that has the qualification of a qualified investor and any insurance capital management company shall accord with the relevant provisions of the CIRC.

Article 10

The capital obtained by an insurance company from collection of subordinated debts may be reckoned in the attached capital, but shall not be used to make up the daily management loss of the insurance company.

The amount of subordinated debts that may be reckoned in the attached capital as determined by an insurance company shall accord to the relevant provisions on rules for compilation of solvency reports as promulgated by the CIRC.

Article 11

The raiser shall retain law firms to issue legal opinions on the collection of subordinated debts of the current time.

The legal opinions shall clearly state opinions on the legitimacy and compliance of such matters as the collection conditions, collection plans, collection clauses, credit rating and etc.. The law firm shall issue legal opinions objectively and fairly and undertake the corresponding liability.

Article 12

The raiser may retain credit rating institutions to make credit rating on the subordinated debts of the current time.

The credit rating institution shall issue the relevant report documents objectively and fairly and undertake the corresponding liability.

Article 13

The raiser may collect subordinated debts itself or by entrusting it to an institution that has qualification for undertaking securities underwriting business.

Article 14

The board of directors of an insurance company shall make plans for the collection of subordinated debts. And in the shareholders' meeting special resolution on the following matters concerned shall be made:

1.

The scale, time limit, interest rate and objects of collection;

2.

The purpose of the fund collected;

3.

The period of validity of the resolution on the collection of subordinated debts; and

4.

Other important matters related to the collection of the subordinated debts of the current time.

Article 15

When applying for collection of subordinated debts, the insurance company shall submit the following documents to the CIRC:

1.

The application report for collection of subordinated debts;

2.

The special resolution of the shareholders' meeting on the collection of subordinated debts of the current time;

3.

The feasibility study report;

The feasibility study report shall include the following contents:

(1)

The analysis on the cost and benefit of the subordinated debts (the scale and time limit of the fund collected, pricing of the debts and cost analysis, the use of the fund collected, the prediction of income, influence to the solvency, etc.); and

(2)

The confirmation of the targeted creditor and its/his status.

4.

The prospectus of collection;

5.

The text of the agreement or contract of the subordinated debts and the legal opinions thereof;

6.

The annual financial reports after audit and the solvency reports of the company in the past three years and the financial reports and the solvency reports at the end of the latest quarter;

7.

The total amount of unpaid subordinated debts that have been collected and the use circumstance of the fund collected;

8.

The subordinated debts management plan made by the raiser;

9.

Other important contracts related to the collection of the subordinated debts; and

10.

Other materials that shall be provided as required by the CIRC.

Where an insurance company has made credit rating on the subordinated debts collected at the current time, it shall also submit the credit rating report of the subordinated debts.

Article 16

The raiser shall report the collection conditions to the CIRC within 10 workdays after the end of the collection of the subordinated debts and submit the photocopy of the subordinated debt contract concluded with the creditors of the subordinated debts to the CIRC.

Article 17

No subordinated debts may be redeemed ahead of schedule except otherwise specified by the CIRC.

Chapter III Repayment of Debts

Article 18

Only when it can ensure that the solvency adequacy ratio after repayment of the principals and interests shall be not less than 100%, the insurance company may repay the principals and interests of any subordinated debts.

Article 19

In case it is necessity to postpone any subordinated debts, the raiser shall put forward a proposal on the time limit for the deferment, adjustment of interest rate and etc. and win consent of the creditor of the subordinated debts.

The raiser shall report the deferment circumstance to the CIRC within 5 workdays after signing deferment agreement with the creditor of the subordinated debts and submit the photocopy of the text of the relevant contracts to the CIRC.

Article 20

The raiser shall manage the funds of subordinated debts collection in a special account and use the funds collected strictly pursuant to the purpose of the funds collected in the feasibility study report and the subordinated debt management plan.

Article 21

No raisers may distribute profits to any shareholder during the period that it/he fails to repay the principals and interests of the subordinated debts on schedule.

Chapter IV Information Disclosure

Article 22

The contents and the making and promulgation of such information disclosure documents as the subordinated debts prospectuses, special topic financial reports and notices of major matters concerned and etc. shall comply with the relevant provisions of the CIRC.

Article 23

The insurance company shall make prospectus and other information disclosure documents according to the relevant provisions of the CIRC for collection of subordinated debts and ensure that all the information that has substantial influence to the collection objects is disclosed truthfully, accurately, completely and timely. But no information may be published in the media openly or in disguised forms.

No raisers or relevant parties concerned may mislead any investor in any way to purchase any subordinated debts.

Article 24

The raiser shall give indication to the investor in the eye-catching place of the prospectus that: "When purchasing the current subordinated term debts, the investor shall carefully read the prospectus and the relevant information disclosure documents and make independent investment judgment. The approval of China Insurance Regulatory Commission for the collection of the current subordinated term debts neither indicates that it has made any appraisal on the investment value of the current debts, nor does it indicate that it has made any judgment on the investment risk of the current debts".

Article 25

The raiser shall clarify in the collection clause of the prospectus the following promises:

1.

Only when the raiser can ensure that the solvency adequacy ratio be not less than 100% after such repayment, it can repay the principals and interests of the subordinated debts;

2.

If the raiser isn't capable of paying interests or repaying principals on time, the creditor does not have the right to apply to the court for implementation of bankruptcy and repayment to the raiser; and

3.

After the raiser enters into the bankruptcy liquidating procedures according to law, the order of repayment of the principals and interests of the subordinated debts shall be ranked after all the non-subordinated debts.

Article 26

The collection clause in the prospectus of collection shall be concrete and clear, and shall fully disclose the provisions to the investors on the collection, redemption, deferment of the subordinated debts and the repayment of principals and interests of the present Measures and specify the rights and obligations of both parties of the subordinated debts. The contents of the stipulated clauses may not violate laws, administrative regulations and the mandatory provisions of the CIRC.

The prospectus of collection shall at least include the following contents:

1.

The scale, time limit (starting time and termination time), interest rate and objects of the collection of the subordinated debts;

2.

The purpose of the fund collected;

3.

The legal conditions, time, procedures and ways for repayment of principals and interests;

4.

The transfer and redemption ahead of schedule of the subordinated debts;

5.

The liability of the raiser and the creditor of the subordinated debts result from their breach of contract; and

6.

Intermediary institutions and their liability.

Where any raiser has made credit rating on the collection of the current subordinated debts, such contents as the credit rating reports and arrangement for follow-up rating shall also be included in the prospectus.

Article 27

During the period of existence and extension of the subordinated debts, the raiser shall disclose the subject financial reports of the subordinated debts in the previous year to the creditor of the subordinated debts within 4 months after the end of each fiscal year. The report shall at least include the following contents:

1.

The audited financial statements;

2.

The audited solvency quotas statement, the computation sheet for the minimum solvency quotas, the recognized assets statement and the recognized liabilities statement;

3.

The payment of the principals and interests of the debts;

4.

The purpose of the fund collected;

5.

The items such as major investment and associated transactions that influence the repayment of the principals and interests of the subordinated debts; and

6.

Other information that has great influence on the creditor of the subordinated debts.

Where the raiser has made follow-up rating, the circumstances of follow-up rating shall also be included.

Article 28

In case any of the following circumstances happens to a raiser, the creditor of the subordinated debts shall be notified in time:

1.

There occurs a great unfavorable alteration in its solvency status;

2.

It is estimated that it is difficult to repay the interests or principal of the due subordinated debts;

3.

Signing of guaranty contracts and other important contracts that may have great influence on the repayment of principals and interests of the subordinated debts;

4.

Happening with great losses or being suffered with great losses exceeding more than 10% of the net assets;

5.

Happening with major arbitration and litigation;

6.

Decreasing of capital, merging, dividing, dissolving and applying for bankruptcy; or

7.

Planning to make major reorganization of debts.

Chapter V Supervision and Administration

Article 29

For any insurance company that violates the provisions of the present Measures, the CIRC may charge it to make correction within a prescribed time limit or take the following supervision measures according to circumstances:

1.

To charge the company to dismiss and replace the senior managers of the insurance company who are directly liable and other directly liable personnel;

2.

Not to accept the application of insurance companies for the collection of subordinated debts any longer within three years;

3.

To suspend the determination of the amount of subordinated debts that may be reckoned in the attached capital of the insurance company; and

4.

To form the rectification organization according to law to make rectification on insurance companies.

Article 30

Where any insurance company violates the provisions of the present Measures, impairs public interests and may seriously endanger or has endangered its solvency, the CIRC may take over the insurance company according to law.

Article 31

Where any insurance company and its senior managers directly liable and other directly liable personnel violate the provisions of the present Measures, the CIRC shall give them warnings, impose a fine of 5,000 Yuan up to 30,000 Yuan singly or concurrently. If any of them is suspected of committing a crime, it/he shall be transferred to the judicial department and subject to criminal liability according to law.

Chapter VI Supplementary Provisions

Article 32

The power to interpret and revise the present Measures shall remain with the CIRC.

Article 33

The present Measures shall come into force as of the date of promulgation.