Laws of the People's Republic of China

CHAPTER I GENERAL PROVISIONS

CHAPTER II THE ESTABLISHMENT OF INSURANCE ENTERPRISES

CHAPTER III THE PEOPLE'S INSURANCE COMPANY OF CHINA

CHAPTER IV CAPACITY TO INDEMNIFY AND RESERVE INSURANCE FUNDS

CHAPTER V REINSURANCE

CHAPTER VI SUPPLEMENTARY PROVISIONS

CHAPTER I GENERAL PROVISIONS

   Article 1. These Regulations have been formulated to strengthen the State's management of insurance enterprises, to promote the development of the insurance industry, to protect the interests of insured parties (called the "insured person" in insurance forms and certificates), to allow full use of insurance for economic compensation, and to benefit socialist modernisation and the security of the people's livelihood.

   Article 2. These Regulations apply to all enterprises which operate any type of insurance business.

   Article 3. All State, co-operative and individual assets within China which require insurance must be insured with an insurance enterprise within China.

   Article 4. The People's Bank of China shall be the State body in charge of insurance management.

The responsibilities of the State's body in charge of insurance management are: to formulate insurance industry policy and guidelines; to approve the establishment of insurance enterprises; to direct and supervise the business activities of insurance enterprises; to examine and decide on basic insurance clauses and insurance rates; to examine the accounting books and statements of insurance enterprises; and to levy economic penalties including ordering a cessation of business on those insurance enterprises which during their operation take actions which violate the State's laws, regulations and policies, or harm the legal interests of insured parties.

   Article 5. The State encourages insurance enterprises to develop rural business and to provide insurance services for the peasants. Insurance enterprises must support peasants in establishing, on a voluntary basis, mutual help insurance co-operatives. The scope of business of these and their management methods shall be determined separately.

CHAPTER II THE ESTABLISHMENT OF INSURANCE ENTERPRISES

   Article 6. The establishment of insurance enterprises and the operation of insurance business must be approved by the State body in charge of insurance management, and application for a business licence must be made to the Administration for Industry and Commerce. The State body in charge of insurance management and the Administration for Industry and Commerce shall investigate and handle cases of insurance enterprises operating without a business licence.

When applying to the State body in charge of insurance management to establish an insurance enterprise the applicant shall provide the following documents:

(1) The articles of association of the enterprise (which must state clearly: the enterprise name, the types of business operation, source of funds, the organisational structure);

(2) Proof of sufficient capital funds;

(3) List of names of senior people in the enterprise.

   Article 7. Any alteration to the articles of association of the insurance enterprise or of its capital funds or in its senior personnel must be approved by the State body in charge of insurance management.

   Article 8. The capital funds which must be held by insurance enterprises are:

(1) Insurance enterprises offering personal insurance shall have actual cash capital of not less than RMB 20 million;

(2) Insurance enterprises offering insurance in areas other than personal shall have actual cash capital of not less than RMB 30 million;

(3) Insurance enterprises offering the two types of insurance mentioned in 1 and 2 above shall have actual cash capital of not less than RMB 50 million.

   Article 9. Insurance enterprises must deposit 20% of their cash capital as a guarantee, in a bank specified by the State body in charge of insurance management. This may not be withdrawn without the approval of the State body in charge of insurance management.

   Article 10. Insurance enterprises which offer both personal and other types of insurance must set out their personal insurance in separate accounts.

CHAPTER III THE PEOPLE'S INSURANCE COMPANY OF CHINA

   Article 11. The PICC is a State enterprise engaged in national insurance and reinsurance business.

The PICC engages in the following business activities:

(1) Operation of all types of insurance and reinsurance business;

(2) Provision of consulting services to other insurance enterprises;

(3) Representation of the State in attending international insurance business activities, within the scope authorised by the State;

(4) Other business authorised by the State.

   Article 12. Unless otherwise determined in laws and regulations or approved by the State Council, the following business may only be operated by the PICC:

(1) Legal insurance;

(2) All types of foreign currency insurance business;

(3) All types of insurance business for State enterprises, foreign investment, Sino-foreign joint ventures and Sino-foreign co-operative ventures;

(4) International reinsurance business.

CHAPTER IV CAPACITY TO INDEMNIFY AND RESERVE INSURANCE FUNDS

   Article 13. Insurance enterprises covering other than long-term personal insurance shall have a capacity to indemnify which shall not be less than a difference between real assets and outstanding debts as stipulated by the State body in charge of insurance management. When this is not sufficient the enterprise must increase capital to make up for the shortfall.

   Article 14. Those insurance enterprises covering long-term personal insurance shall have a minimum capacity to indemnify in which the reserve funds for long-term personal insurance shall not be less than the total of all effective outstanding insurance obligations. When this is not sufficient the enterprise must increase capital to make up the shortfall.

   Article 15. In order to protect the interests of the insured parties, insurance enterprises must set aside the following reserve funds:

(1) Reserve funds for unrealised commitments.

Insurance enterprises which cover all types of insurance other than long-term personal insurance must set aside from that year's retained insurance premiums reserve funds for unrealised commitments. The total amount set aside and retained shall be the equivalent to 50% of that year's retained premiums.

(2) Reserve funds for personal insurance.

Insurance enterprises covering personal insurance shall set aside reserve funds according to the total net value of all long-term life insurance policies and 50% of retained premiums of that year's personal insurance policy commitments of one year or less.

The net value of long-term personal insurance policies (that is the total obligation of the insurance enterprise to insured parties) must be checked and decided by the State body in charge of insurance management.

(3) Total reserve funds.

Each year after the PICC and other State-run insurance companies have paid all taxes and set aside funds as called for in regulations the total profit shall be deposited in the total reserve funds.

The State body in charge of insurance management shall separately determine use of surplus funds by non-State-run insurance enterprises.

   Article 16. The reserve funds for personal insurance and other insurance business set out in Article 15 must be in separate accounts and may not be diverted from one to the other.

   Article 17. The State body for insurance management may regulate the method of utilizing all reserve funds for insurance enterprises, and insurance enterprises must abide by these regulations.

CHAPTER V REINSURANCE

   Article 18. Insurance enterprises established under the provisions of Article 6 of these Regulations must reinsure at least 30% of their total insurance business with the PICC.

   Article 19. An insurance enterprise engaged in all types of non-personal insurance shall not allow its insurance of any one high-risk unit to exceed 10% of its total of actual capital and total reserve funds, except with the special permission of the State body in charge of insurance management. Any amount over this limit must be reinsured with the PICC.

   Article 20. With the exception of insurance enterprises specially determined by the State body in charge of insurance management, no insurance enterprises may split or authorise reinsurance business through foreign insurance companies or people who carry out insurance business.

CHAPTER VI SUPPLEMENTARY PROVISIONS

   Article 21. The following meanings apply to terms used in these Regulations:

(1) Personal insurance: insurance in which the insured or a person authorised by the insured receives insurance payments upon injury, sickness, old age of the insured or when the insurance period is fulfilled.

(2) All types of insurance business other than personal insurance: assets insurance, agricultural insurance, liability insurance, guarantee insurance, credit insurance, etc.

(3) Reinsurance: when an insurance enterprise hands over the whole or a part of its insurance obligations to another insurance enterprise.

(4) High risk unit: the extent of damage which may be caused by a one-off, accidental disaster. This is the basis for planning the maximum liability which an insurance enterprise can accept.

   Article 22. Articles 18 and 20 of these Regulations are for use by Protection and Indemnity Club.

   Article 23. These Regulations do not apply to social insurance.

   Article 24. These Regulations shall come into force on April 1, 1985.