Laws of the People's Republic of China

Official Reply of China Insurance Regulatory Commission Concerning Such Matters as the Determination of Insurance Value

Bao Jian Ting Han [2007] No.71

The Insurance Regulatory Bureau of Inner Mongolia:

We have received your Request for Instructions on Such Issues as the Determination of Insurance Value (Nei Bao Jian Fa [2007] No.24). Upon study, we hereby reply as follows:

1.

As regards the term "insurance value", at present, there is not any clear definition in any legislation. In accordance with the interpretations on the Insurance Terms formulated by China Insurance Standardization Technical Committee, insurance value means the value of insurance object as stipulated by both parties and indicated in the insurance contract or the actual value of insurance subject matter at the time when the insurance accident occurs.

In accordance with provisions of Article 40 of the Insurance Law, two ways may be adopted for determining the insurance value of an insurance subject matter, namely, either be stipulated by the insured and the insurer and indicated in the insurance contract or be determined in accordance with the actual value of the insurance subject matter when insurance accident occurs. The former means valued insurance and the latter means unvalued insurance. In actual practice, attention shall be paid to whether stipulation in the insurance contract is about the insurance amount or the insurance value of insurance subject matter.

2.

The term "replacement value" means the value or expenses spent for replacing damaged property with the same or similar substance and quality, which is a method for deciding insurance value in property insurance.

The term that "the insurance value of fixed assets shall be the replacement value at the time when insurance accident occurs" means that the insurance value of fixed assets shall be decided in accordance with the replacement value as provided for in the basic insurance clauses of life insurance or property insurance.

3.

As regards an insurance, the insurance amount of which is determined by way of price appraisement, after an insurance accident occurs, the insurance value shall be decided in accordance with the actual value of insurance object at the time when the insurance accident occurs.

China Insurance Regulatory Commission

April 3, 2007