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e0344220040615 The China Insurance Regulatory Commission Provisions on the Administration of Insurance Companies January 13,2000 ContentsChapter I General Provisions Chapter II Insurance Institutions Chapter III Insurance Operations Chapter IV Terms of Insurance and Rate of Premium Chapter V Administration and Use of Insurance Funds Chapter VI Solvency of the Insurance Companies Chapter VII Reinsurance Chapter VIII Supervision and Inspection Chapter IX Penalty Provisions Chapter X Supplemental Provisions Chapter I General Provisions
Article 1 These Provisions have been enacted according to the Insurance Law of the People's Republic China (hereinafter referred to as the Insurance Law), the Company Law of the People's Republic of China (hereinafter referred to as the Company Law) and other relevant laws and regulations in light of strengthening the supervision and administration of the insurance companies, maintaining the normal order of the insurance market, protecting the lawful rights and interests of the insured and promoting the healthy development of the insurance industry.
Article 2 The China Insurance Regulatory Commission (hereinafter referred to as CIRC) shall be the authority in charge of the commercial insurance affairs nationwide and shall be responsible for the supervision and administration of the insurance companies according to the authorization of the State Council.
Article 3 The insurance companies shall not be subject to the intervention of the government organizations at all levels, social institutions or individuals in their lawful insurance activities.
Article 4 The insurance companies as mentioned in these Provisions shall refer to the commercial insurance companies of all types that have been established and registered upon the approval of the insurance supervisory administration authority. The branches of the insurance companies as mentioned in these Provisions shall refer to the branch companies, sub-branch companies and business offices that have been established upon the application of the insurance companies for business operations. Unless otherwise approved by the CIRC, the branches of the insurance companies shall not exist in any other form. The insurance institutions as mentioned in these Provisions shall refer to the insurance companies and their branches.
Chapter II Insurance Institutions
Article 5 The establishment of insurance companies or their branches shall be subject to the approval of the CIRC. Unless approved by the CIRC, no unit or individual shall conduct or conduct in any disguised form the commercial insurance business within the territory of the People's Republic of China.
Article 6 The establishment of an insurance company shall be eligible for the following principles: 1. observing the laws, regulations and administrative rules concerning insurance; 2. contributing to the stability of the insurance market and financial system; 3. separation of operation between the insurance business and banking and securities businesses; separation of operation between the property insurance business and life insurance business; 4. rational distribution and fair competition.
Article 7 The following conditions shall be satisfied in the application for establishing an insurance company: 1. An insurance company that is engaged in the nationwide insurance business shall have a paid-in cash capital of not less than five hundred million yuan RMB. An insurance company that is engaged in the insurance business within a specific region shall have a paid-in cash capital of not less than two hundred million yuan RMB. 2. The high-ranking management personnel of the insurance company shall be eligible for the professional qualifications as required by the CIRC. 3. An insurance company that is engaged in the nationwide life insurance business shall consist of not less than three actuaries approved by the CIRC. An insurance company that is engaged in the regional life insurance shall consist of not less than one actuary approved by the CIRC. 4. The applicant shall have business offices and facilities corresponding to the business scale and staff. 5. The shareholders of a stock-limited insurance company shall be business corporations or other organizations as permitted for investment by the state; the shareholders shall be eligible for the qualifications as required by the CIRC. 6. Other conditions as required by the CIRC.
Article 8 The application for establishing an insurance company shall be accompanied by the following documents in triplicate: 1. an application for establishment; 2. a feasibility study report; 3. plans for establishment; 4. letter of intent of the investors for subscription of shares and background materials of the investors, including the nature of the institution, type of organization, time of establishment, authority of approval, legal representative, registered capital, etc; 5. resumes and personal statements of the person responsible for the establishment, the candidates for the chairman of the board of directors and the general manager; 6. other documents as required by the CIRC.
Article 9 The CIRC shall make a decision whether to approve or not to approve within six months after receiving the application. In case no response is made in due time, the application shall be deemed as having been approved. If the application is not approved, the applicant shall not submit similar applications with one year.
Article 10 In the event an application is approved for establishing an insurance company, the establishment shall be completed within six months. If the establishment fails to be completed within the time limit, the original approval becomes void automatically. The time limit for establishment may be extended for six month upon the application of the person responsible for the establishment and the approval of the CIRC. The preparatory organization shall not, during the period of establishment, be engaged in any insurance business.
Article 11 After the completion of the establishment, the insurance company may file an application for start of business, subject to the submission of the following documents in triplicate to the CIRC: 1. an application for start of business; 2. a certification of assessment of capital issued by an assessment organization approved by the CIRC and a duplicate of the original documents of entry into account of registered capital; 3. resumes of the persons to be employed as executive officers, and an introduction of the setup of the departments of the company and the composition of staff; 4. certification of ownership or land use right to the business ground or office; 5. articles of incorporation (draft); 6. a three-year plan of management and scheme of reinsurance; 7. the terms of insurance and rate of premium for the type of insurance to be engaged in; 8. a report on the configuration of computer facilities and software; 9. other materials as required by the CIRC.
Article 12 The insurance company may, according to the demand of business, apply for the establishment of branches. The branches shall take the form of a subsidiary company, (central) branch company, or business office. The head business office of the insurance company shall be responsible for the administration of the branch companies and business offices of the place where the company is located. No subsidiary companies shall be established in the place where the head business office is situated.
Article 13 If an insurance company, which is established with the minimum registered capital as prescribed in item 1 of article 7 , is a national company, it may apply for establishing not more than three subsidiary companies; if it is a regional company, it may apply for establishing not more than two subsidiary companies. Moreover, an additional registered capital of not less than 50 million yuan shall be added to the registered capital for each application of establishing a subsidiary company or a branch on the provincial level. If the registered capital of the applicant has reached the requirement as prescribed in the previous paragraph, it may not make corresponding additions of registered capital. Where a national company has a registered capital of not less than 1.5 billion yuan, and a regional company has a registered capital of not less than 500 million yuan, and if they are adequately solvent, they may establish branch organizations without addition of registered capital.
Article 14 The application for establishing branch organizations of an insurance company shall be filed by the head office.
Article 15 An insurance company applying for the establishment of a branch organization shall satisfy the following conditions: 1. the establishment shall be contributory to the development of the local insurance market; 2. the business of the head office shall have been in operation for not less than one year, and the registered capital shall be eligible for the requirement as mentioned in Article 13 of these Provisions; 3. the insurance company shall have sound regulatory rules, be in normal operation and adequately solvent; 4. the insurance company shall have no record of serious violation of laws and regulations, and the organization by whom a branch organization is to be established shall have passed the annual examination; 5. the insurance company shall have the executive personnel that are eligible for the requirements of the CIRC; 6. the organization previously approved has been established and has been in smooth operation; 7. other conditions as required by the CIRC.
Article 16 An insurance company, when applying for the establishment of a branch organization, shall submit a formal application. The application shall include the scope of business, a three-year plan for development and a market analysis, the persons to be responsible for the establishment, a plan for the computer facilities and the planned site of business, etc.
Article 17 The CIRC shall determine the approval of the application for establishing branch organizations according to the demand of market development and the specific conditions of the insurance company such as the premium income, solvency, business management, internal regulation, the number and distribution of existing branch organizations, etc.
Article 18 The CIRC shall decide to approve or disapprove the application within three month after its receipt. Failure to respond within the due time shall be deemed as approval. If the application is denied, the insurance company shall not file similar applications within six months. If the application is approved, the applicant insurance company shall start on the preparatory work of the branch organization. The time for the establishment shall not exceed six month; if the establishment is not completed within the specified time, the original approval becomes void automatically. The time for the establishment may be extended for three months, subject to the application of the applicant insurance company and the approval of the CIRC.
Article 19 The insurance company shall, after the establishment of the branch organization, submit an application to the CIRC for start of business and for a License for Engagement in Insurance Business. The application for start of business shall include the completion of establishment, the scope of business, the leaders of the branch organization, the site for business and relevant certifications, computer facilities, setup of internal departments, staff and personnel, etc.
Article 20 Alterations concerning the following items of the insurance company shall be subject to the approval of the CIRC: 1. amendment of the articles of incorporation; 2. change of address; 3. increase or decrease of registered capital; 4. assignment of shares; 5. change of type of organization; 6. readjustment of scope of business; 7. change of company title; 8. split or merger; 9. other alterations that need approval of the CIRC.
Article 21 The possession of shares by an individual shareholder of a joint stock insurance company limited (including its related companies or on behalf of others) exceeding 10% of the registered capital shall be subject to the approval of the CIRC.
Article 22 The decisions of the board of directors of the insurance company shall be submitted, within fifteen days after the close of the meeting, to the CIRC for record.
Article 23 The alterations of the branch organizations of an insurance company concerning the items as mentioned below shall be subject to the approval of the CIRC: 1. withdrawal or merger of organization; 2. change of title of organization; 3. readjustment of scope of business; 4. change of site for business; 5. other alterations that need the approval of the CIRC.
Article 24 The examination and administration of the credentials of the executive officers of the insurance company shall be conducted in accordance with the relevant provisions of the CIRC.
Article 25 The insurance company shall set up a special customer service agency or a department responsible for consultation and complaints, and shall publicize the telephone numbers for complaint.
Article 26 The joint stock insurance company shall, in the process of issuing new shares to the public, abide by the Company Law of the People's Republic of China and relevant provisions concerning the supervision and regulation of securities. If any of the following occurs, the company shall not issue new shares to the public: 1. the company has gross violations against the laws and regulations during the last three years; 2. the previous issue of shares has not been fully subscribed and an elapse of two years has not passed; The issue of new shares to be subscribed fully by the existing shareholders, the transfer of profit into new shares and the distribution of common reserve fund in the form of new shares shall not be subject to the restraint as mentioned in the previous paragraph;
Article 27 The insurance license is the legitimate certification of engagement of the insurance institutions in the insurance business. The insurance license may be classified into the Corporate License for Insurance Institution and the License for Engagement in the Insurance Business. The Corporate License for Insurance Institution shall be the credential for the insurance company to be engaged in the insurance business, while the License for Engagement in the Insurance Business shall be the credential for the branch organizations of the insurance company to be engaged in the insurance business.
Article 28 A Corporate License for Insurance Institution shall be issued by the CIRC to the insurance company that has obtained the approval for establishment, while a License for Engagement in the Insurance Business shall be issued by the CIRC to the branch organization of the insurance company that has obtained approval for establishment. The insurance company or its branch organizations shall not start business until it has gone through registration proceedings with the Administration for Industry and Commerce by submitting the approval and license issued by the CIRC and has obtained the license for business. The insurance institution shall, in the process of making alterations upon the approval, submit the authentic copy and its counterpart of the licenses and relevant approval to the CIRC for change of licenses.
Article 29 The CIRC shall be responsible for the design, printing, issuance, withholding, cancellation and revocation of the license for insurance. No other units or individuals shall design, withhold, cancel or revoke the license for insurance.
Article 30 The insurance institution and its branch organizations shall place the authentic copy of the insurance licenses in an eye- catching position of the site for business and shall put the counterpart of the licenses under lock and key for further examination.
Article 31 The insurance licenses shall be changed every three years. In the event that a license is missing, the insurance institution shall, within fifteen days starting from the day of its knowledge, publish a statement for nullification on the newspapers designated by the CIRC and file an application to the original issuing authority for reinsurance.
Article 32 The insurance institution shall not counterfeit, alter, rent, lend, transfer or sell the insurance license.
Article 33 The CIRC shall charge a fee from the insurance institutions applying for the issuance or change of insurance licenses.
Article 34 The insurance company shall obtain the approval of the CIRC for the establishment of solely-funded companies or joint venture companies or branch organizations overseas.
Article 35 The insurance company shall, when withdrawing an overseas insurance institution as mentioned in Article 34 , apply to the CIRC for approval. In the event of the revocation of the insurance license or the bankruptcy of an overseas insurance institution, the insurance company shall report to the CIRC for record.
Article 36 The insurance may set up representative offices upon the approval of the CIRC. The representative offices shall be responsible for the consultation, liaison and coordination of relevant business of the insurance company, but shall not engage in the insurance business operation. The insurance company shall obtain the approval of the CIRC for the establishment of representative offices overseas.
Article 37 In the event the insurance is dissolved, withdrawn or declared bankrupt according to law, the liquidating group shall notify the creditors within ten days after its formation and shall make a public announcement in the newspapers designated by the CIRC for at least three times.
Article 38 The insurance company shall file an application with the CIRC for dissolution in accordance with the articles of incorporation or the decision of the shareholders meeting, and submit the following documents in triplicate: 1. an application for dissolution; 2. the decision of the shareholders' meeting; 3. liquidation procedure; 4. plan for the arrangement of credits and debts; 5. the organization of the liquidating group and its leader; 6. plan for the distribution of assets; 7. other documents required by the CIRC.
Article 39 In the event of dissolution or withdrawn according to law, the insurance company shall terminate its business immediately, and shall return the insurance licenses.
Article 40 A liquidating group shall be formed in the event of the dissolution or withdrawn of the insurance company by law. The liquidating group shall entrust certified accountant firms, actuary firms and law firms for the evaluation of the credits, debts and assets of the company. The CIRC may supervise and guide the liquidating work.
Article 41 In the event the insurance company is dissolved or withdrawn according to law, the assets of the company shall be disposed of by way of auction or public tendering. If the assets are transferred through negotiation, a report shall be submitted to the CIRC for record.
Article 42 In the event the insurance company is dissolved or declared bankrupt according to law, the plan for the transfer of insurance contracts shall be submitted to the CIRC for approval. If the insurance contract is transferred in accordance with the provisions as mentioned in the previous paragraph, the scheduled rate of premium as prescribed in the long-term life insurance terms and conditions shall be subject to the readjustment of the CIRC.
Article 43 In the event of the dissolution of the insurance company, the shareholders of the company shall not, before the completion of liquidation, distribute the assets of the company or obtain any benefit from the company.
Article 44 If, in the process of liquidation, the insurance company being dissolved is found to be insolvent, an application shall be filed for bankruptcy claim, and the liquidation of assets and disposition of credits and debts shall be conducted in accordance with the bankruptcy procedure of the insurance company, unless it is otherwise prescribed by laws, regulations or administrative rules.
Chapter III Insurance Business Operation
Article 45 A property insurance company may, upon the approval of the CIRC, engage in all or some of the businesses as mentioned below: 1. insurance for loss of business property; 2. insurance for loss of household property; 3. insurance for construction projects; 4. insurance for installation projects; 5. insurance for freight transportation; 6. insurance for motor vehicles; 7. insurance for vessels; 8. insurance for airplanes; 9. insurance for space flight; 10. insurance for nuclear power stations; 11. energy insurance; 12. insurance for statutory liabilities; 13. insurance for general liabilities; 14. guaranty insurance; 15. credit insurance; 16. insurance for the planting industry; 17. insurance for the aquacultures industry; 18. other insurance businesses as approved by the CIRC; 19. the reinsurance of the insurance business as mentioned above.
Article 46 An insurance company may, upon the approval of the CIRC, engage in all or part of the following business: 1. personal accidental injury insurance; 2. personal fixed-term death insurance; 3. personal endowment insurance; 4. personal perpetual life insurance; 5. personal annuity insurance; 6. personal short-term health insurance; 7. personal long-term health insurance; 8. group accidental injury insurance; 9. group fixed-term life insurance; 10. group perpetual insurance; 11. group annuity insurance; 12. group short-term health insurance; 13. group long-term health insurance; 14. other personal insurance business as approved by the CIRC; 15. reinsurance of the insurance businesses as mentioned above.
Article 47 With the approval of the CIRC, a reinsurance company may engage in all or some of the insurance businesses as mentioned below: 1. acceptance of the outward reinsurance of the property insurance companies; 2. acceptance of the outward reinsurance of the life insurance companies; 3. acceptance, with the approval of the CIRC, of the legitimate outward reinsurance of the domestic insurance companies; 4. engagement in the retrocession business; 5. engagement in international reinsurance business.
Article 48 When applying for expansion of the scope of insurance business, the insurance company shall meet the requirements of the CIRC concerning the registered capital, operating period, business performance, etc.
Article 49 An insurance company which, upon the approval of the CIRC and the competent foreign exchange authorities, may engage in the insurance business, shall limit its foreign exchange business to the head office. Where a branch organization needs to engage in the foreign exchange business, it shall apply for approval separately.
Article 50 A branch organization of the insurance company may, upon the approval of the CIRC, engage in all or some of the insurance businesses of the insurance company.
Article 51 The insurance institutions shall engage in the insurance business within the areas as prescribed in the license for insurance. The insurance company doing business in large and medium-sized cities shall set up corresponding branch organizations.
Article 52 Two or more insurance companies engaged in the coinsurance of a same subject matter of special risks such as large projects or satellites, or at least one of the insurance companies has obtained approval for coinsurance in the place where the subject matter is located, shall not be subject to the restrictions concerning the area for business.
Article 53 The insurance company may engage in the insurance of large industrial and commercial projects or large construction projects in other places that meets one of the requirements below: 1. the total amount of insurance of the enterprise or all the property of the project exceeds 500 million yuan; 2. the total income of insurance premium resulting from the insurance as mentioned above exceeds 1 million yuan;
Article 54 If one of the following requirements is met, an insurance company may engage in the insurance business in other places in the form of blanket policy: 1. the insurance institution of the place where the investor corporation is located may engage in the insurance business of the national key construction projects in other places in the form of blanket policy; 2. if the corporate organization or the major object of insurance (above 50% of the amount of insurance) or the insured lies within the business area of the insurance institution, but some of the project or the part of business not subject to independent accountability lies in other places, the insurance institution may, while engaging in the insurance business of the local place, also engage in the aforesaid insurance business in the form of blanket policy.
Article 55 The insured may select an insurance company for insurance upon his own will. The insurance company shall not force overtly or in disguised form the insured to apply for insurance, unless it is otherwise prescribed by law or regulation.
Article 56 An insurance company shall not entrust an insurance agent that has not obtained the approval of the CIRC for business, nor accept the insurance business of an insurance broker that has not obtained the approval of the CIRC, nor pay to the unlawful intermediaries service charges, insurance commissions, or similar expenses.
Article 57 An insurance shall not engage in vicious pricing competitions for the purpose of squeezing out its rivals through abnormally low rate of premium or expanding the scope of insurance liability.
Article 58 An insurance company shall not injure the credit and reputation of other insurance companies by counterfeiting or distributing false facts. An insurance company shall not attack its rivals and reap commercial profits by resorting to the judgments or penalty decisions of the CIRC, other government departments or the court.
Article 59 An insurance company shall not, for the purpose of controlling market, induce the applicant for insurance or the insured to cancel the contract concluded with other insurers.
Article 60 An insurance company shall not make use of the government organizations, other organizations of state power, monopolistic industries, departments or enterprises to unlawfully squeeze out other insurance companies or impede the normal insurance business of other insurance companies.
Article 61 An insurance company shall not provide to the insurance applicant, the insured or the beneficiary any kickback of insurance premium or other benefit or interest in violation of the laws and regulations, nor shall the insurance company pay to the insurance agents commissions or service charges beyond scope or standard.
Article 62 The propaganda materials of the insurance company shall be comprehensive, objective, complete and truthful. The insurance company shall not conduct false, misleading propaganda work concerning the content of the terms of insurance or service quality by advertisement or other means.
Article 63 The propaganda materials of the insurance company shall include the title of the insurance company, the telephone numbers and the address for consultation and complaint. The propaganda materials of the insurance company shall not predict the profit or dividends of the company or indefinite policy benefits like participation, return of margin, etc. Insurance liabilities shall not be overstated or overstated in disguised form in the propaganda materials.
Article 64 The insurance company shall present the exclusion clauses, clauses of discharging insurance or refunding of insurance premium as prescribed in the insurance contract in a special way. The insurance company shall not make partial or one-sided comparison of the terms of insurance, rate of premium with the similar clauses or rate of premium of other insurance companies or financial organizations.
Article 65 The insurance company shall exercise supervision over the operations of its insurance agents. Any actions of the insurance agents in violation of the laws and regulations shall be terminated or corrected immediately upon discovery.
Article 66 The associated transactions of the insurance company shall be subject to the approval of the CIRC. Associated transactions as mentioned in the previous paragraph refer to: 1. the insurance and reinsurance between the connected companies; 2. the management, guaranty of assets and agency service between the connected companies; 3. the sale of fixed assets or assignment of credits and debt between the connected companies. The transactions between an insurance company and other organizations with legal person status whose chairman of the board of directors or whose general manager is the chairman of the board of directors or the general manager of the insurance company or a relative of his lineal descent.
Chapter IV Terms of insurance and Rate of Premium
Article 67 The range of the "major types of commercial insurance" as mentioned in Article 106 of the Insurance Law of the People's Republic of China shall be subject to the approval of the CIRC. The CIRC may make readjustments to the range of the major types of insurance in accordance with the circumstances of the market. The CIRC shall be responsible for the drafting and revision of the basic terms of insurance and the rate of premium. The CIRC may entrust the insurance industry association or insurance companies for the drafting of the basic terms of the major types of insurance and the rate of premium.
Article 68 The terms of insurance and rate of premium as drafted by the insurance companies shall be submitted to the CIRC for record. If the CIRC fails to file any objection to the terms of insurance and rate of premium within thirty days after the receipt of the application for record, the insurance companies may implement the terms of insurance and rate of premium. The branch insurance organizations shall not, without the authorization of the insurance company, draft the terms of insurance and rate of premium of their own initiative.
Article 69 If the terms of insurance or rate of premium drafted by the insurance company meets one of the following circumstances, the CIRC may demand the insurance company to make revisions or demand the insurance company to stop using them: 1. in violation of the prohibitive provisions of the laws, regulations or administrative rules; 2. in violation of the relevant financial policies of the state; 3. injuring the public interest of the society; 4. obviously unfair in content or monopolistic in pricing so that the lawful rights and interests of the insurance applicant, the insured or the beneficiary might be injured; 5. the rate of premium being lower than the cost for the purpose of unfair competition; 6. the design of the terms or the stipulated rate of premium or the scheduled rate of interest being improper so that the solvency of the insurance company might be in danger; 7. other circumstances as required by the CIRC.
Article 70 The CIRC may promulgate model texts of the terms of property insurance or life insurance.
Article 71 The scheduled rate of interest as prescribed in the long- term life insurance policy of the life insurance company shall not be higher than the relevant provisions of the CIRC. The life chart of the life insurance company shall be subject to the approval of the CIRC.
Article 72 The same terms of insurance shall be implemented for the same type of insurance. An insurance company may, according to the specific circumstances of the locality, decide upon the rate of premium of the locality and submit to the CIRC for approval before implementation. The CIRC may also prescribe the standard rates of premium or levels of floating for the rate of premium.
Article 73 An insurance company shall, in the reporting, revision or readjustment of terms of property insurance or rate of premium for record, shall submit the following documents: 1. text of terms of insurance and rate of premium for record in triplicate; 2. prediction of the market for insurance products, the ratio of damage of the insurance object within the recent three years, the scheduled insurance loss ratio, the scheduled management expenses and the scheduled rate of interest; 3. the formula for the calculation of rate of premium and the grounds for its determination; 4. the propaganda materials for the type of insurance; 5. other documents as required by the CIRC.
Article 74 The insurance company shall, in the reporting, revision or readjustment of the terms of life insurance and rate of premium for record, submit the following documents: 1. text of terms of insurance and rate of premium for record in triplicate; 2. prediction of the market for insurance products, the scheduled rate of interest, the scheduled rate of expenditure and the life chart to be used; 3. rate of premium, reserve fund for insurance liability, the formula and way for the calculation of the cash value of the policy; 4. the propaganda materials for the type of insurance; 5. other documents as required by the CIRC.
Chapter V The Management and Use of the Insurance Fund
Article 75 The insurance company shall collect security deposits by law. The insurance company may, with the approval of the CIRC, pay for the security deposits in the form of negotiable securities affirmed by the CIRC.
Article 76 All the insurance liability reserves paid by the insurance company shall be true and adequate.
Article 77 The insurance company shall collect a reserve for outstanding losses according to the claimed sum of insurance indemnity or performance; if the insured event has occurred but no claim for insurance indemnity or performance has been presented, a reserve for unreported losses shall be collected. The reserve shall not exceed four percent of the total sum of payment of actual indemnity for the year.
Article 78 The common reserve fund of the insurance company shall be used for the compensation of the losses of the company or for the increment of the registered capital of the company. If the insurance company decides to transform the common reserve funds into registered capital by way of the decision of the board of directors, new shares shall be distributed to the original shareholders or the par value of the shares shall be increased. But in the event of the legal reserve funds being transformed into registered capital, the remained reserve funds shall not be less than twenty five percent of the registered capital.
Article 79 Unless it is otherwise approved by the CIRC, the registered capital, reserve fund and all types of reserve funds for insurance liability shall be used only within the territory of the People's Republic of China.
Article 80 The use of insurance capital shall be confined to: 1. the bank deposits; 2. the buying and selling of treasury bonds; 3. the buying and selling of financial debentures; 4. the buying and selling of debentures of central enterprises as designated by the CIRC; 5. other means of capital use as approved by the State Council. The use of capital by the insurance company shall be carried out in conformity to the laws, regulations and other relevant provisions of the CIRC.
Chapter VI Solvency of the Insurance Company
Article 81 The insurance company shall have the minimum solvency corresponding with its business scale.
Article 82 The actual solvency of the insurance company shall be the balance between the value of actual assets and the actual debt. The types and admissible rates of actual assets as mentioned in the previous paragraph shall be determined by the CIRC, and the actual assets shall be the total sum of the admissible value of admissible assets.
Article 83 The tranche of minimum solvency in the property insurance and short-term life insurance businesses shall be the higher of the two circumstances as mentioned below: 1. 18 percent of the balance between the insurance premium retained for private use and the after-tax premium for the same financial year which is less than 100 million yuan or 16 percent of the balance which is more than 100 million yuan. 2. 26 percent below 70 million yuan or 23 percent above 70 million yuan of the average annual loss during the recent three years. For a company which has been in operation for less than three years, the first circumstance as mentioned above shall be applied.
Article 84 The minimum tranche of solvency for long-term life insurance business shall be the total of the following two items: 1. 4 percent of the life insurance reserve fund at the end of the financial year for general life insurance business and 1 percent of the life insurance reserve fund at the end of the financial year for investment-related insurance business; 2. 0.1 percent of the amount of risk insurance for term demise insurance whose duration of insurance coverage is less than three years; or 0.15 percent of the amount of risk insurance for term demise insurance whose duration of insurance coverage is more than three years but less than five years; or 0.3 percent of the amount of risk insurance for term demise insurance whose duration of insurance coverage is more than five years or other type of insurance. Where the duration of insurance is not specified in the statistics, the 3 percent level of the risk insurance amount shall apply.
Article 85 Where the actual solvent capacity of the insurance company is below the level as provided by this Regulation, it shall be dealt with as follows: 1. If the actual solvent capacity of the insurance company falls below the minimum solvency level, it shall take effective measures in an effort to satisfy the minimum solvency standard and make an explanation to the CIRC; 2. If the actual solvency capacity of the insurance company falls to 50 percent below of the minimum solvency level, or the actual solvency has been below the minimum solvency level for three consecutive years, the CIRC may take the aforesaid insurance company as the object of high spot supervision and inspection; The insurance company shall not, during the period when it is regarded as the object of high spot supervision and inspection, apply for the establishment of a branch organization or for the payment of any dividend or bonus; the CIRC may order the company to improve its solvency conditions by means of reinsurance, business transfer, suspension of new business, increasing its registered capital by means of issuing more shares, or readjusting the industrial structure. 3. If, after the actual solvency level of the insurance company falls to 30 percent below the minimum solvency level, or is subject to high spot supervision or inspection, the financial situation of the company continues to worsen so that the interest of the insured or the general public may be injured, the CIRC may take it over.
Chapter VII Reinsurance
Article 86 The insurance company shall make a payment of 20 percent of each transaction to the reinsurance company designated by the CIRC for legal sessions, with the exclusion of life insurance transactions.
Article 87 The insurance company shall submit a reinsurance plan for the next year before November 1 of each year to the CIRC for approval. The reinsurance plan of the insurance company shall include such contents as contracted insurance, plan for the use of foreign exchange, premium retention, plan for temporary distribution, etc.
Article 88 In case the insurance company needs to deal with outward reinsurance business, it shall take precedence in making the transaction with the insurance companies within the territory of the People's Republic of China; however, if the conditions of foreign insurance companies for reinsurance are apparently preferential, it may also handle the business with the foreign companies. Subject to the same circumstances, the inward reinsurance company shall take priority in accepting the outward transactions of the of the domestic insurance companies; if the inward reinsurance company needs to retrocede the reinsurance transactions that it has accepted, priority shall be taken in providing the retrocession to domestic insurance companies.
Article 89 The inward or outward reinsurance business between the affiliated companies shall be subject to the approval of the CIRC.
Chapter VIII Supervision and Inspection
Article 90 The principle of the market behavior supervision and regulation as well as solvency supervision and regulation shall be concurrently followed in the supervisory administration of the insurance industry. The insurance companies shall accept the supervision and inspection of the CIRC in accordance with the law.
Article 91 The on-site approach and the non-on-site approach shall be combined in the supervision and inspection of the CIRC over the insurance institutions.
Article 92 The CIRC conducts its supervision and inspection on the routine and yearly basis. The routine and yearly supervisions and inspections shall include all or some of the following items: 1. whether approval has been obtained from all competent authorities for the establishment or alteration; 2. whether the application materials are in conformity with the practical situation; 3. whether the registered capital, public reserve fund or other types of reserve funds are real and sufficient; 4. whether the solvent capability meets the requirements; 5. whether the business operations and the financial status are good, and whether the statements are complete and real; 6. whether the business operations are beyond the scope of business or beyond the geographical areas; 7. whether the terms of insurance and the rate of premium have been followed according to law; 8. whether the formalities for the appointment or change of personnel are complete; 9. whether the business offices and safety facilities are up to the requirements; 10. other matters that the CIRC deems necessary for inspection;
Article 93 The insurance institutions shall, within fifteen days after receiving the notice for yearly inspection, submit to the CIRC the following materials: 1. an application for yearly inspection; 2. balance sheets and profit statements; 3. a duplicate for the Corporate License for Insurance Institutions and Business License for Engagement in Insurance Business; 4. other materials that the CIRC deems necessary.
Article 94 For those insurance institutions that have passed the yearly inspection, an official seal shall be fixed by the CIRC to the duplicates of the licenses; those that have failed in the yearly inspection shall be ordered to make corrections in due time.
Article 95 The CIRC may take the insurance company as the object for high spot inspection if one or all of the following situations occurs: 1. there is a gross violation of law or regulations; 2. the financial status becomes abnormal; 3. the statements have not been submitted as required; 4. the terms of insurance, the rate of premium, the plan for insurance or other plans or schemes that have been approved or reviewed by the CIRC have not been implemented; 5. other matters that the CIRC deems necessary for high spot inspection.
Article 96 The CIRC may make inspections to the insurance institutions at any time. The insurance institutions shall cooperate, and submit relevant documents and materials according to the requirements of the CIRC.
Article 97 The workers of the CIRC shall, in the process of inspection, show their credentials or papers; where the CIRC entrusts the certifies accountants' firms or auditors' firms for the inspection, the entrustment shall be made in written form.
Article 98 The insurance company shall submit to the CIRC statements of operation, actuarial reports, financial statements and relevant business supervision reports.
Article 99 The statements of all kinds and business reports submitted by the insurance company to the CIRC shall be complete, real and accurate.
Article 100 The reports of operation, financial reports and relevant statements shall bear the signatures of the legal representative or general manager of the insurance company or the certified accountant as approved by the CIRC. The actuarial reports of the life insurance company shall bear the signature of the actuary as approved by the CIRC. The reports and statements of the branch insurance institutions shall bear the signature of seal of the person-in-charge of the upper- level company.
Chapter IX Penalty Provisions
Article 101 Where an insurance institution violates the insurance laws in the process of handling insurance business, regulations or the Provisions, the CIRC shall mete out to the relevant insurance company or the person or persons who are held responsible one or all of the administrative punishments as mentioned below: 1. a warning or being ordered to make corrections; 2. confiscation of the illegal proceeds; 3. pecuniary penalty; 4. disqualification of the senior management; 5. restricting the scope of business, being ordered to suspend the acceptance of new transactions; 6. being ordered to suspend business for internal rectification; 7. withdrawing the insurance licenses or canceling the insurance institution.
Article 102 Where an insurance company is established in violation of Article 5 of these Provisions or is illegally engaged in commercial insurance business, the company shall be affixed with criminal liability or shall be canceled. Where such activity does not constitute a crime, the illegal income shall be confiscated and a pecuniary penalty of one to five times the illegal income shall be imposed upon. Where no illegal income has occurred, a fine of not less than 100,000 yuan but not more than 500,000 yuan shall be impose upon.
Article 103 Where an insurance company establishes a branch organization or representative office without approval or in violation of Article 5 or 36 of these Provisions, it shall be ordered to make corrections and cancel the illegally established organization or representative office, and shall be imposed upon a fine of not less than 50,000 yuan but not more than 300,000 yuan. If the circumstances are serious, it may be restricted in its scope of business, ordered to make corrections or suspend the acceptance of new transactions, or the insurance licenses shall be canceled. Where an overseas organization is established or canceled without approval upon application and filing for record in accordance with Articles 34 and 35 of these Provisions, it shall be affixed a warning and imposed upon a fine of not less than 50,000 yuan but not more than 300,000 yuan; if the circumstances are serious, it may be restricted in its scope of business, ordered to suspend the acceptance of new transactions, or the licenses may be withdrawn.
Article 104 Where an insurance institution acts in violation of Article 20 or 23 of these Provisions, it shall be ordered to make corrections; in case it fails to make corrections in due time, it shall be affixed a warning and be imposed upon a fine of not less than 10,000 yuan but not more than 100,000 yuan.
Article 105 Where an insurance institution is engaged in the insurance business beyond the authorized scope of business or beyond the authorized geographical area for business in violation of Articles 45, 46, 47, 48, 50 or 51 shall be affixed a warning and ordered to make corrections; where any illegal income has occurred, it shall be confiscated, and a fine of not less than one time but not more than five times the illegal income shall be imposed upon; where no illegal income has occurred, a fine of not less than 100,000 yuan but not more than 500,000 yuan shall be imposed upon; in case it fails to make corrections in due time or serious consequences have resulted, it may be ordered to suspend business for internal rectification, or its licenses may be withdrawn.
Article 106 Where an insurance institution compels or compels in a disguised way the insured to effect an insurance in violation of Article 55 , it shall be ordered to make corrections, and the illegal income shall be confiscated; if the circumstances are serious, a fine of not less than one time but not more than three times the illegal income shall be imposed upon; if no illegal income has occurred, a fine of not less than 5,000 yuan but not more than 30,000 yuan shall be imposed upon.
Article 107 Where an insurance institution is engaged in unfair competition as against the provisions in Article 57 or 60, it shall be affixed a warning; if any illegal income has occurred, a fine of not less than one time but not more than five times the illegal income shall be imposed upon, and the illegal income may be confiscated concurrently; if no illegal income has occurred, a fine of not less than 50,000 yuan but not more than 200,000 yuan shall be imposed upon; if the circumstances are serious, it may be ordered to suspend business for internal rectification or its licenses may be withdrawn. Where an insurance company is engaged in affiliated transactions and thus injuring the normal operation of other insurance companies, it shall be deemed as unfair competition and shall be punished according to the provisions as mentioned in the previous paragraph.
Article 108 Where an insurance institution acts in violation of Article 58 , 59, 62 or the second paragraph of 64, it shall be ordered to make corrections and eliminate the consequences, and be imposed upon a fine of not less than 10,000 yuan but not more than 200,000 yuan.
Article 109 Where an insurance institution violates the provisions of Article 56 , it shall be affixed a warning, ordered to make corrections and imposed upon a fine of not less than one time but not more than five times the sum of remunerations it has paid.
Article 110 Where an insurance institution violates the provisions of Article 61 of these Provisions, it shall be given a warning, ordered to take back the rebates, commissions, handling charges or any other benefits, and shall be imposed upon a fine of the same amount.
Article 111 Where an insurance institution violates the provisions of Articles 75, 76, 77, 80, 86, 87, or 88, it shall be ordered to make corrections, and be imposed upon a fine of not less than 50,000 yuan but not more than 300,000 yuan. If the circumstances are serious, it may be restricted in the scope of business, ordered to suspend the acceptance of new transactions or its licenses may be withdrawn.
Article 112 Where an insurance institution commits one or all of the acts as mentioned below, it shall be ordered to make corrections. In case it fails to make corrections in due time, it may be restricted in the scope of business, ordered to suspend the acceptance of new transactions or its licenses may be withdrawn: 1. having failed to submit relevant reports, statements, documents or other materials; 2. having failed to report the designated terms of insurance or rate of premium for record; 3. having failed to obtain approval for affiliated transactions.
Article 113 Where an insurance institution commits one or all of the acts as mentioned below, it shall be ordered to make corrections. In case it fails to make corrections in due time, it shall be given a warning, and be imposed upon a fine of not less than 100,000 yuan but not more than 500,000 yuan: 1. having provided false reports, statements, documents or materials; 2. having rejected or hampered inspections or supervisions.
Article 114 For the senior management personnel or other personnel who are held directly responsible for the violations of the provisions as mentioned in these Provisions, the CIRC may, according to the seriousness of the violations, punish him or her with a warning or disqualification, and/or impose a fine of not less than 5,000 yuan but not more than 30,000 yuan.
Chapter X Supplemental Provisions
Article 115 These Provisions shall apply to the administration of insurance companies with foreign investment, unless it is otherwise prescribed in the laws, regulations or the Provisions of the CIRC. The insurance business operations of the branch companies established in China by insurance companies with foreign investment upon approval shall be governed by the laws or regulations that include such provisions or by these Provisions if no laws or regulations include such provisions.
Article 116 All the statements and materials of the insurance company submitted to the CIRC shall be written in Chinese. If the original is in a foreign language, a Chinese version shall be attached, and the Chinese version shall prevail in case there is any discrepancy between the two versions.
Article 117 The representative agencies of the CIRC shall exercise power on behalf of the CIRC only within the scope of authorization.
Article 118 The interpretation of these Provisions shall remain with the CIRC.
Article 119 These Provisions shall enter into force as of the date March 1, 2000.
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