Laws of the People's Republic of China

(Effective Date 1996.08.16)

CHAPTER ONE GENERAL PROVISIONS

CHAPTER TWO ESTABLISHMENT, CHANGE AND TERMINATION OF BUSINESS

OF INSURANCE AGENCIES

CHAPTER THREE BUSINESS SCOPES OF INSURANCE COMPANIES

CHAPTER FOUR ADMINISTRATION AND USE OF INSURANCE FUNDS

CHAPTER FIVE LICENSE ADMINISTRATION

CHAPTER SIX ADMINISTRATION OF INSURANCE CLAUSES AND INSURANCE

PREMIUM RATES

CHAPTER SEVEN ADMINISTRATION OF THE REPAYMENT ABILITY OF INSURANCE

COMPANY

CHAPTER EIGHT ADMINISTRATION OF INSURANCE BUSINESS

CHAPTER NINE SUPERVISION AND ADMINISTRATION

CHAPTER TEN PENALTY PROVISIONS

CHAPTER ELEVEN APPENDIX

   Article 1 This set of regulations are formulated with a view to strengthening the supervision and administration of the insurance business to promote its healthy development in accordance with the "Insurance Law of the People's Republic of China" (hereinafter referred to as the "Insurance Law").

   Article 2 As the supervision and administrative department of financial affairs for the State, the People's Bank of China is responsible for supervising the insurance business under the leadership of the State Council in the following aspects:

(1) Examine, approve and administer the establishment, change and termination of business of insurance agencies;

(2) Formulate and revise rules and premium rates for major kinds of insurance; and

(3) Supervise, administer and examine various insurance businesses and audit their accounts; check and prohibit the unauthorized insurance agencies and illegal or disguised insurance businesses.

Insurance companies carry out their insurance business according to law shall be free from any interference of local governments, government departments at all levels, social organizations and individuals.

   Article 3 The insurance companies as referred to in this set of regulations are those set up with the approval of the People's Bank of China including legally registered property, personal, re-insurance and other kinds of insurance companies.

The subdivisions of insurance companies as referred to in this set of regulations are branch companies, liaison offices, business departments and representative offices of insurance companies. Such subdivisions must not be set up in any other forms unless otherwise authorized by the State.

The insurance agencies as referred to in this set of regulations are insurance companies and their subdivisions and other agencies engaged in insurance business, under the approval by the People's Bank of China.

CHAPTER TWO ESTABLISHMENT, CHANGE AND TERMINATION OF BUSINESS OF INSURANCE AGENCIES

   Article 4 An insurance company should be established fully in line with the following principles:

(1) Conforms to the need of the development of the national economy;

(2) Separation of property from personal insurance;

(3) Rational distribution and fair competition; and

(4) Stresses of economic performance.

   Article 5 When applying to establish an insurance company and its subdivisions, the applicant should have the following conditions:

(1) An insurance company which conducts insurance business nationwide should have a paid in cash capital of not less than RMB500 million; an insurance company which conducts insurance business within a designated area should have a paid in cash capital of not less than RMB200 million; an insurance company which is set up in the location of a provincial, an autonomous regional, a municipal or a city which enjoys the provincial status in planning, government should have a total operation fund of not less than RMB50 million.

(2) Chairman, vice-chairman, president and vice-president of an insurance company, president and vice-president of a branch company, chief and deputy chief of a liaison office and business department (hereinafter referred to as leading responsible persons) should acquire qualifications set by the People's Bank of China.

(3) More than 60% of the employees of the insurance company should have engaged in insurance business and graduated from insurance or relevant departments of universities or colleges. An insurance company which engages in life insurance business should have at least one actuary recognized by the People's Bank of China.

(4) An insurance company should have a definite business site and office facilities which can well accommodate its business and staff members.

(5) Shareholders of an insurance stock company of limited-liability should acquire shares of the company in accordance with the regulations of the People's Bank of China in respect to investment to financial institutions.

(6) For applying for establishment of a branch company, the insurance company should have been operational for more than one year with good performance, with an appropriate repayment ability, a complete internal management system, and without any record of serious legal violations and major prosecutions.

(7) Other conditions as required by the People's Bank of China.

   Article 6 An insurance company may apply for the establishment of subdivisions in accordance with the increased amount of insurance premium proceeds.

One branch company can be applied for establishment in the area of its business activities whenever its premium proceeds increase by RMB100 million.

A branch company may apply for the establishment of one subdivision within the area of its jurisdiction whenever its insurance premium proceeds increase by RMB50 million.

A branch company or subdivision may apply for the establishment of one liaison office within the area under its jurisdiction whenever its insurance premium proceeds increase by RMB20 million.

An insurance company can only establish one branch company in one city.

   Article 7 Subdivisions of insurance companies may apply for changing their names provided that their business performance is good. A subdivision of a branch company may apply for changing its name into a branch company once its premium proceeds reach RMB40 million; and a liaison office may apply for changing its name into a subdivision of a branch company once its premium proceeds reach RMB10 million.

   Article 8 The People's Bank of China exercises two-level examination and approval for the establishment and the change of name of the insurance companies and its subdivisions.

(1) The Head Office of the People's Bank of China may examine and approve the establishment and the change of names of the following agencies:

1. Establishment of insurance companies;

2. Establishment of the branch companies of insurance companies, and changes of the name of a subdivision of a branch company into a branch company;

3. Establishment of representative offices of insurance companies; and

4. Establishment of pilot insurance agencies.

(2) Branch offices of the People's Bank of China in provinces, autonomous regions, municipalities or cities enjoying provincial status in planning may examine and approve the establishment and the changes of the name of the following agencies:

1. Establishment of subdivisions of branch companies of insurance companies;

2. Establishment of liaison offices and the changes of their names into subdivisions of branch companies; and

3. Establishment of business departments and the changes of their names into subdivisions of branch companies.

Before approvals to the establishment of a subdivision or change of name of a liaison office into a subdivision the matter should be reported to the Head Office of the People's Bank of China for the record. It shall be regarded as approved if the People's Bank of China does not raise any objections within 30 days beginning from the date of receiving the documents for the record.

   Article 9 The establishment of an insurance company should go through stages of preparation and starting business.

   Article 10 An applicant should submit the following materials in applying for the establishment of an insurance agency:

(1) Application report for the establishment of the insurance agency;

(2) Feasibility study report on the establishment of the insurance agency;

(3) The establishment plan and the background of the investors, including the time for the establishment, examining and approving department, legal person representative, registered capital, and the financial situation of the applicant in the latest three years;

(4) Resumes of the leading responsible persons for the establishment; and

(5) Other materials as required to be submitted by the People's Bank of China.

   Article 11 The time the People's Bank of China needs to approve the application for the establishment of an insurance company is three months, and if the People's Bank of China does not approve after three months, the applicant should not submit the same application within six months

   Article 12 After approval by the People's Bank of China, the establishment of an insurance company should be completed within six months; if it is not completed, the original documents approving its establishment shall become invalid automatically. In special cases, the establishing time may be extended appropriately with the approval of the People's Bank of China, but the time for the extension should not be longer than one year. An insurance company should not conduct any insurance business during the time of establishment.

   Article 13 In applying for starting business, an insurance company should submit to the People's Bank of China five copies of each of the following materials:

(1) Application report for starting the business;

(2) Certificate for capital verification issued by a capital verification agency which is approved by the People's Bank of China, and duplicated copies of the original vouchers of the capital funds or operation funds entering into the account book;

(3) Resumes of the would-be leading responsible persons of the insurance company and the basic setup of the company staff members;

(4) Certificate of the ownership or the use right of the business site;

(5) Company's articles of association which should confirm to the regulations of "The Insurance Law of the People's Republic of China" and "The Company Law of the People's Republic of China". The content of the articles of association should include name of the agency, registered capital, business site, nature of the agency, business aims, business lines, organization form, management, termination, liquidation and other items;

(6) Reinsurance plan; and

(7) Other materials as required to be submitted by the People's Bank of China.

   Article 14 An insurance company which has been approved to start business by the People's Bank of China should start its business after it goes through the formalities of registration and obtaining the business license with the administrative department for industry and commerce on the strength of the certificate of approval and the insurance business license

   Article 15 The People's Bank of China shall check on the qualifications of the would-be leading responsible persons of an insurance company as stipulated in the second clause of Article 5 of this set of regulations; those who have not been checked by the People's Bank of China or are not qualified cannot be appointed. This also applies to the change of the responsible persons.

The qualifications for the leading responsible persons of an insurance company shall be worked out separately by the People's Bank of China.

   Article 16 The standard name of a subdivision of an insurance company should include;

(1) For a branch company: insurance company + name of the place + branch company;

(2) For a subdivision company of a branch company: insurance company + name of the place + subdivision company; and

(3) For a liaison office: insurance company + name of the place + subdivision company + liaison office or business department.

   Article 17 An insurance company which has not a subdivision can only carry out business where it is registered.

Other insurance agencies can only carry out businesses in areas approved by the People's Bank of China.

   Article 18 Changes of the following items of an insurance agency should report to the People's Bank of China for approval in advance;

(1) Increase and decrease of registered capital funds and adjustment of the structure of stock rights;

(2) Change of the organizational form of the agency;

(3) Adjust the business scope;

(4) Change of the name of the agency;

(5) Division and merge of the agency;

(6) Revise the articles of association;

(7) Change of business address; and

(8) Other changes as deemed necessary to be approved by the People's Bank of China.

For reporting procedures and examining and approving authority of the above items, please see stipulations of Article 8 of this set of regulations.

   Article 19 The termination of business of an insurance agency in accordance with the "Insurance Law" should be reported to the People's Bank of China for approval.

CHAPTER THREE BUSINESS SCOPES OF INSURANCE COMPANIES

   Article 20 An insurance company is not allowed to both undertake personal insurance and property insurance business.

   Article 21 The business scope of a property insurance company is limited to the following.

(1) Property loss insurance, liability insurance, credibility insurance and agricultural insurance; and

(2) The re-insurance of the above insurances.

   Article 22 The business scope of a personal insurance company is limited to the following:

(1) Life insurance, accidental injury insurance and health insurance; and

(2) The re-insurance of the above insurances.

   Article 23 The business scope of a re-insurance company is limited to the following:

(1) Accept the re-insurances of the original insurance companies in Articles 21 and 22 of this set of regulations;

(2) Accept the legal re-insurance of the domestic insurance companies with the approval of the People's Bank of China;

(3) Handles the transfer of the re-insurance business; and

(4) Undertake international re-insurance business with the approval of the People's Bank of China.

CHAPTER FOUR ADMINISTRATION AND USE OF INSURANCE FUNDS

   Article 24 Insurance funds refer to the capital fund, guarantee fund, operational fund, various reserve funds, accumulation fund, public welfare fund, undistributed surplus fund, insurance guarantee fund and other State authorized funds.

   Article 25 The total amount of the operational fund an insurance company allocates to its branch company should not exceed 60% of its capital plus accumulation fund.

   Article 26 An insurance company which undertakes business nationwide should deposit an amount of guarantee fund at the Head Office of the People's Bank of China. Insurance companies which undertake business in specially designated areas should deposit guarantee fund at the branch offices of the People's Bank of China in provinces, autonomous regions, municipalities and cities that enjoy the provincial status in planning, where they register.

An insurance company is not allowed to use the guarantee fund without the approval of the People's Bank of China.

   Article 27 Insurance companies which undertake insurance businesses other than life insurance should draw premature liability reserve fund from the premiums retained by itself for the year; the amount retained and carried over should not be less than 50% of the premium by itself in the year.

An insurance company with life insurance operations should draw the premature liability reserve fund according to the entire net value of the valid life insurance policies.

The premature liability reserve fund of an insurance company should be true and adequate.

   Article 28 An insurance company should draw reserve for outstanding losses according to the insurance indemnities or payment claimed or thought the insurance indemnities or payment not yet claimed but the insured incidents have already occurred.

   Article 29 Before distributing the after-tax profits in the year, an insurance company should draw 10% of the profits as legal accumulation fund, and draw 5 -10% of the profits as public welfare fund. No accumulation fund should be drawn if the company's aggregated legal accumulation fund tops 50% of the company's registered capital.

After drawing legal accumulation fund from the after-tax profits, the insurance company may draw arbitrary accumulation fund according to the resolution adopted at the meeting of shareholders.

   Article 30 Accumulation fund of an insurance company is used to make up for the loss of the company, expand the company's business scope, or to be turned into the company's capital fund.

When a limited-liability insurance company turns the accumulation fund into its capital according to the resolution of the meeting of the shareholders, the amount of the share of the shareholder is increased according to its original ratio of shares. But when legal accumulation fund is turned into capital fund, the retained accumulation fund shall not be less than 25% of the company's registered capital.

The legal public welfare fund is used for the collective welfare of the company's employees.

   Article 31 Apart from the guarantee fund, an insurance company should only deposit its savings in a big commercial bank with good capital credibility.

   Article 32 An insurance company should draw 1% of the insurance premium proceeds of the year as its insurance guarantee fund and the drawn should be stopped whenever the guarantee fund has topped 10% of the total assets of the insurance company.

The insurance guarantee fund should be drawn separately and be deposited at a special account in the People's Bank of China or any commercial bank designated by the People's Bank of China.

   Article 33 The use of the insurance fund is limited to the following:

(1) Bank savings;

(2) Buy and sell government securities;

(3) Buy and sell financial securities; and

(4) Other uses as stipulated by the State Council.

CHAPTER FIVE LICENSE ADMINISTRATION

   Article 34 An insurance business license, a legal person license or an insurance business license, is a legal certificate of an insurance agency to undertake legal business.

   Article 35 The People's Bank of China is entitled to design, print, issue, confiscate and revoke the insurance business licenses. Any other units or individuals are not allowed to design, print, issue, confiscate and detain the licenses.

   Article 36 An insurance business license should have an original and a duplicate to record the name of the insurance agency, its serial number, nature and form of organization, the amount of the registered capital or the operational funds, names of the legal representative and leading responsible person, business scope, date of issue and the term of validity.

   Article 37 An insurance agency should put the original of the insurance business license at a prominent place and take good care of the duplicate for examination. It is forbidden to forge, alter, lease, lend, transfer and sell the license.

   Article 38 A license shall be changed every three years and when lost during the term, the insurance agency concerned should announce its invalidity at a newspaper designated by the People's Bank of China or by its branch offices within 15 days beginning from the date of discovery of the loss, and re-apply to the original issuing department for a new one upon the presentation of a written self-criticism and the announcement.

   Article 39 The People's Bank of China shall charge the insurance agency which gets or changes its license a certain amount of fee according to stipulations.

CHAPTER SIX ADMINISTRATION OF INSURANCE CLAUSES AND INSURANCE PREMIUM RATES

   Article 40 The insurance clauses and insurance premium rates and other documents of an insurance agency should be printed in Chinese, and it may have an appendix in a foreign language when in need in business operations. Should there be any contradictions between the Chinese version and the foreign language version, the Chinese version shall dominate.

   Article 41 Major insurance varieties refer to those confirmed by the People's Bank of China, which has the right to readjust the major insurance varieties according to the market situation.

The basic clauses and insurance premium rates for the major varieties are worked out by the Head Office of the People's Bank of China.

   Article 42 Insurance clauses and insurance premium rates of other insurance varieties worked out by an individual insurance company should be reported to the Head Office of the People's Bank of China for the record.

Insurance clauses and insurance premium rates of other insurance varieties formulated by the branch company of an insurance company should be reported to the branch offices of the People's Bank of China in provinces, municipalities, autonomous regions or cities enjoying provincial status in planning for the record; insurance clauses and insurance premium rates reported to the People's Bank of China for the record shall be deemed as confirmed if the bank does not raise any different opinions within 30 days beginning from the date of receiving the reports.

Subdivisions of the branch company of an insurance company and its liaison offices should not formulate insurance clauses and insurance premium rates.

   Article 43 In reporting the property insurance clauses and insurance premium rates, insurance companies should submit the following documents:

(1) Five copies of the insurance clauses and insurance premium rates;

(2) Market forecast of the insured products, materials about the loss of the objects of insurance in the latest three years and the planned insurance compensation rates, various administrative expenses and interest rates;

(3) The calculating formula and method; and

(4) Other materials as required to be submitted to the People's Bank of China.

   Article 44 In reporting life insurance clauses and insurance premium rates, the insurance company should submit the following documents:

(1) Five copies of the insurance clauses and the insurance premium rates;

(2) Market forecast of the insured products, the planned interest rates, expenses rates and profits rates and the life table used;

(3) The formula and method of calculating insurance premium rates, insurance liability reserve funds, and insurance withdrawal funds; and

(4) Other materials as required to be submitted to the People's Bank of China.

   Article 45 While reporting the insurance clauses and premium rates of a new insurance to the People's Bank of China for the record, insurance companies may apply for a six-month protection period of the new insurance, and other insurance companies should not undertake the same kind of insurance.

   Article 46 Within the same province, autonomous region or municipality, various insurance companies should use a unified package of insurance clauses, insurance premium rates and premium floating ranges of a same kind of insurance. The floating ceiling for the premium is 30%, and the actual floating range shall be worked out by the branch offices of the People's Bank of China in the province, autonomous region or the municipality according to the local actual conditions.

   Article 47 Records of annual compensation rates, premium rates, and profit rates of insurance companies and subdivisions should be well kept for at least 10 years.

CHAPTER SEVEN ADMINISTRATION OF THE REPAYMENT ABILITY OF INSURANCE COMPANY

   Article 48 Insurance company should have a lowest repayment ability in compatible to its business scope.

   Article 49 The lowest repayment ability of an insurance company is the balance of its actual assets after deducting the actual debts as stipulated by the People's Bank of China.

The actual assets of an insurance company are the balance of its total assets after deducting the following items:

(1) Various advance payments except advance repayments;

(2) Deferred assets;

(3) Intangible assets;

(4) Low value and fast depreciated articles;

(5) Actual bad receivables;

(6) Cost of securities in exceed of current market price;

(7) Bad accounts in funds;

(8) One-tenth of the immovable property and fixed assets; and

(9) Other assets which cannot be changed into cash or may suffer losses in the course of changing as considered by the People's Bank of China.

The actual debts of an insurance company are the total assets after deducting the actually received capital fund, public accumulation fund, public welfare fund and the balance of the undistributed profits.

   Article 50 The lowest repayment ability of a property insurance company should be:

(1) not lower than RMB100 million when the self retained net premium proceeds in the preceding year being less than or equal to RMB200 million;

(2) not lower than RMB100 million or one-third of the self retained premium expenses, which is higher, when the self retained net premium proceeds are more than RMB200 million in the preceding year and less than or equal to RMB3 billion; and

(3) not lower than RMB1 billion or one-fourth of the self retained net premium expense, which is higher, when the self retained net premium proceeds are higher than RMB3 billion in the preceding year.

   Article 51 The lowest repayment ability of a life insurance company should be:

(1) not lower than RMB100 million when the actual debt is less than or equal to RMB300 million;

(2) not lower than RMB100 million or one-fourth of the actual debt, which is higher, when the actual debt is more than RMB300 million and less than or equal to RMB1 billion;

(3) not lower than RMB250 million or one-sixth of the actual debt, which is higher, when the actual debt is more than RMB1 billion and is less than or equal to RMB3 billion; and

(4) not lower than RMB500 million or one-eighth of the actual debt, which is higher, when the actual debt is more than RMB3 billion.

   Article 52 Should the repayment ability of an insurance company is lower than the standard set above in this set of regulations, the insurance company should:

(1) immediately undertake re-insurance, business transfer or readjust the asset debt structure in 30 days in a way recognized by the People's Bank of China till it reaches the standard for the lowest repayment ability if the balance is less than 5% of the lowest repayment ability;

(2) immediately stop insurance business from the date of discovering the situation, hand in a report of self-criticism, a remedial plan and a plan to deal with the direct responsible person to the People's Bank of China within 10 days and undertake re-insurance and business transfer, and ask the shareholders to add urgent capital or make up for the balance in other ways recognized by the People's Bank of China within 30 days if the balance is more than 5% and less than 20% of the lowest repayment ability.

(3) do the following upon decision of the People's Bank of China if the balance is more than 20% and less than 40% of the lowest repayment ability:

1. Overhaul and consolidate the company within a set period of time;

2. Stop part of its business;

3. Shut down; and

4. Other measures.

(4) apply to the people's court for announcing its bankruptcy when the balance is more than 40% of the lowest repayment ability.

CHAPTER EIGHT ADMINISTRATION OF INSURANCE BUSINESS

   Article 53 Insurance companies should adhere to the principles of fairness, justice reasonableness and competition in carrying out its business activities.

   Article 54 Insurance companies should not entrust insurance agents unauthorized by the People's Bank of China to carry out its business activities, nor accept the insurance businesses introduced by the insurance brokers unauthorized by the People's Bank of China.

   Article 55 Insurance companies and their employees should not provide insurers, insureds and the beneficiaries with premium discounts or other interests not stipulated in the insurance contracts.

   Article 56 Written promotional materials of the insurance companies should have names of insurance companies.

   Article 57 Written promotional materials should not comprise profit or dividend forecasts of insurance companies.

   Article 58 Insurance personnel should not carry out business activities in areas unauthorized by the People's Bank of China.

   Article 59 After receiving claims for compensation or payment from insureds or the beneficiaries, insurance companies should appraise and decide. If the claims have been approved within the limits of the insurance liability, insurance companies should perform the obligation of compensations or payments within 10 days after they reach agreements on this regard with the insureds or the beneficiaries. If insurance contracts have defined a time limit for the compensations or the payments, the compensation and payment should be made in accordance with the stipulations of the contracts. If the insurers fail to execute this clause, they should compensate the economic losses of the insureds or the beneficiaries arising therefrom apart from paying the compensation.

   Article 60 If insurance companies cannot decide the amount of compensations or payments within 60 days beginning from the date of receiving claims from the insured or the beneficiaries, related certificates and materials, they should make an advance payment of the lowest amount based on the available certificates and materials and make up for the corresponding balance after deciding the final amount.

If insurers refuse to decide the amount or make the payment intentionally, they should compensate the economic losses of the insureds or the beneficiaries arising therefrom.

   Article 61 Insurance companies should not refuse to perform the obligation of compensations or payments on the pretext that the re- insurance companies do not pay the re-insurance compensations, nor refuse to pay the reinsurance companies the re-insurance premium on the pretext that the insureds do not pay the insurance premiums.

Re-insurers should not refuse to pay re-insurance compensations on the pretext that the insureds or the beneficiaries do not perform their obligation.

   Article 62 Apart from life insurance, insurance companies should allocate 20% of their income from each policy to an insurance company authorized by the People's Bank of China (hereinafter referred to as the authorized company) as re-insurance fund.

   Article 63 Insurance companies, branch companies of overseas insurance companies and the authorized company should reach agreements before December 15 every year on how to undertake the legitimate re-insurance business in the following year.

   Article 64 Insurance companies should first of all undertake re- insurance with insurance companies within the territory of the People's Republic of China, but when domestic insurance companies decline to accept the obligation or an overseas insurance company gives an apparent better offer for the re-insurance, the re-insurance may be undertaken with the overseas insurance company.

Under the same conditions, re-insurance companies should first accept re-insurance business of domestic insurance companies and when re- insurance companies need to transfer theirs re-insurance business, the business should be first of all transferred to domestic insurance companies.

CHAPTER NINE SUPERVISION AND ADMINISTRATION

   Article 65 The People's Bank of China implement a system of giving daily and yearly inspections over the insurance agencies.

The Head Office of the People's Bank of China is responsible for the inspection of the insurance companies that undertake business throughout the country; the branch companies of the People's Bank of China in various areas are responsible for inspections of the insurance companies which get registered locally; the subdivisions of the branch companies of the People's Bank of China are responsible for the inspections of the subdivisions of the insurance companies under their jurisdiction.

   Article 66 The content of yearly and daily inspections of the insurance companies includes:

(1) Whether the examining and approving formalities about establishments and changes of the companies are complete;

(2) Whether the contents of the reported materials accord with the actual situation;

(3) Whether the capital fund, operation fund, public accumulation fund and various reserve funds are true and adequate;

(4) Whether they undertake their business out of their business scope or in other areas;

(5) Whether they implement the insurance clauses and insurance premium rates in accordance with regulations;

(6) Whether formalities about the appointment or change of company responsible persons are complete;

(7) Whether the business and financial situations are good and whether the reports are complete and true;

(8) Whether the business operation sites and the safety facilities are up to the requirements; and

(9) Other items as deemed necessary to be inspected by the People's Bank of China.

   Article 67 Annual inspections of the insurance companies should be made in first quarter of the year. Insurance companies should submit the following materials to the People's Bank of China and its subdivisions within 15 days after receiving notices for the annual inspection:

(1) Annual report for the inspection;

(2) Balance sheets and profit and lose statements;

(3) Annual report on its revenue and expenditure;

(4) A duplicated copy of the "Insurance Agency Legal Person License" or "Insurance Business License"; and

(5) Other materials as required to be submitted by the People's Bank of China.

   Article 68 The People's Bank of China shall affix its seal on the duplicated copy of the license when a company's annual inspection is up to the standard, otherwise, the company shall be ordered to correct in a set period of time.

   Article 69 Insurance company can only distribute their after-tax profits after appropriating expenses, making up losses and drawing the public accumulation funds and public welfare funds.

   Article 70 Insurance companies should submit in time their business reports, actuarial reports, financial accounting reports and other related reports to the People's Bank of China according to relevant regulations.

   Article 71 Accounting and statistics reports of insurance companies should be complete, true, timely and accurate.

   Article 72 Business reports, financial statements and other reports should be signed by legal persons or presidents and the certified accountants recognized by the People's Bank of China of the companies. The actuarial report of a life insurance company should be signed or be affixed with the seal of the actuary approved by the People's Bank of China. Reports of subdivisions of the insurance companies should be signed by leading persons of the subdivisions empowered by higher level companies and be affixed with the company seals.

   Article 73 Criminal responsibility shall be affixed on those who establish insurance agencies or engaged in insurance business or similar business without authorization in violation of this set of regulations, and the insurance agencies established thereby shall be banned by the People's Bank of China; If the case is not serious enough to constitute a crime, the People's Bank of China and its subdivisions shall confiscate the illegal proceeds if any and impose a fine ranging from RMB100,000 to RMB500,000. If the case is serious, the offender shall be handed over to be dealt with by judicial department.

   Article 74 Those who violate Article 18 of this set of regulations shall be ordered to correct within 30 days and a fine ranging from RMB10,000 to RMB100,000 shall be imposed. Those who fail to correct within the prescribed time limit shall be criticized by way of circulating a notice of criticism and a fine ranging from RMB1,000 to RMB10,000 shall be imposed on the leading responsible person and the direct responsible person of the company.

   Article 75 Those who commit one of the following acts shall be ordered to correct within 30 days and be imposed a fine ranging from RMB100,000 to RMB500,000; those who fail to correct within the prescribed time limit shall be criticized by way of circulating a notice of criticism, and a fine ranging from RMB1,000 to RMB20,000 shall be imposed on the leading responsible person and the direct responsible person:

(1) Provide false reports, documents and materials; and

(2) Refuse or hinder legislate inspection and supervision.

   Article 76 In the case of over-insurance, those involved shall be ordered to readjust their business scopes by way of re-insurance, transfer of business or increasing insurance capital and shares within 30 days, and be imposed a fine ranging from RMB50,000 to RMB300,000.

   Article 77 Those who commit one of the following acts in violation of this set of regulations shall be ordered to correct within 30 days; and those who fail to correct within the prescribed time limit shall be criticized by way of circulating a notice of criticism and shall be imposed a fine ranging from RMB10,000 to RMB100,000:

(1) Fail to submit relevant reports, documents and materials; and

(2) Fail to submit the insurance clauses and premium rates formulated by the insurance company itself for the record according to related provisions.

   Article 78 An insurance company which does not undertake business in accordance with the primary insurance clauses and premium rates formulated by the People's Bank of China shall be ordered to correct within 30 days and be imposed a fine ranging from RMB100,000 to RMB 500,000. If it fails to correct within the prescribed time limit, it shall be criticized by way of circulating a notice of criticism and shall be stopped from undertaking new business, and its leading responsible person shall be replaced or whose insurance business license shall be revoked.

   Article 79 An insurance agency shall be given a circulating notice of criticism if it accepts and pays for the insurance business introduced by the intermediary agency unauthorized by the People's Bank of China, and be imposed a fine ranging from one time to five times the payment it has made.

   Article 80 If an insurance agency pays a premium discount to the insurer or the insured, it shall be given a circulating notice of criticism apart from being ordered to recall the discount and being imposed a fine equal to the amount of the discount.

   Article 81 If an insurance agency undertakes unauthorized insurance business outside its operation region and its premium proceeds are under RMB10 million, it shall be ordered to return the premium proceeds or transfer the insurance business to other insurance companies free of charge within 30 days, and be imposed a fine ranging from RMB100,000 to RMB500,000. If the premium proceeds are more than RMB10 million, it shall be given a circulating notice of criticism and be imposed a fine ranging from RMB500,000 to RMB1 million apart from being ordered to return the premium proceeds or transfer the insurance business to other insurance companies free of charge within 30 days. If it fails to correct within the prescribed time limit, it shall be ordered to stop undertaking new business and change the responsible person of the insurance agency or its insurance business license shall be revoked apart from the proceeding penalty. The insurance company should still undertake the compensation or the liability of the insurance accidents occurred before the return of the premium expenses.

   Article 82 If a staff member of an insurance company is found to have fabricated the occurrence of insured risks to carry out false claim settlement by taking advantage of his/her position in order to defraud the insurer of the insurance money, criminal responsibilities shall be affixed on him/her and he/she is forbidden to do insurance business work, insurance agency or act as an insurance broker for life.

   Article 83 If an insurance agency is set up without the approval as required by this set of regulations or by cheating, then its establishment is invalid, and the People's Bank of China shall confiscate its illegal proceeds and it shall be given a circulating notice of criticism and be imposed a fine ranging from RMB50,000 to RMB100,000. If the case is serious enough to constitute a crime, it shall be affixed with criminal responsibility according to law. Its insurance business shall be handed over to other insurance agencies within 60 days.

   Article 84 If one of the following acts is committed in violation of this set of regulations, the violator shall be ordered to correct within 60 days and be imposed a fine ranging from RMB50,000 to RMB300,000; if the case is serious enough, the violator shall be ordered to stop underwriting new business or its insurance business license shall be revoked:

(1) Fail to draw and deposit guarantee funds in line with the provisions or use guarantee funds without approval;

(2) Fail to draw or carry down premature liability reserve funds or fail to draw reserve funds for outstanding losses according to the provisions;

(3) Fail to draw public accumulation funds according to the provisions;

(4) Use the insurance funds in violation of related provisions;

(5) Separate or consolidate without approval; and

(6) Fail to allocate operation funds to a lower level unit in line with the provisions or transfer operation funds to a higher level unit without approval.

   Article 85 If an insurance company violates the Insurance Law and underwrites insurance policies with death as the conditions for payment for people incapable of civil acts, the company shall be ordered to return the insurance premium within 30 days beginning from the date of discovery and be imposed a fine ranging from RMB50,000 to RMB300,000.

   Article 86 If the representative office of an insurance company is engaged in insurance business or insurance agency or insurance brokerage, the illegal proceeds shall be confiscated, and it shall be given a circulating notice of criticism and be imposed a fine ranging from RMB10,000 to RMB50,000; if the case is serious, the representative office shall be in addition ordered to change its responsible person, and even cancel itself.

   Article 87 If an insurance company commits other law-breaking acts not listed from Article 74 through Article 88 of this set of regulations, it shall be given the following penalties by the People's Bank of China according to the seriousness of the case such as a circulating notice of criticism, a fine, change of the company's leading responsible person, stopping business and straightening things out, and the revoke of its insurance business license.

The above penalties may be repeatedly imposed at the same time.

   Article 88 This set of regulations apply to the branch companies of overseas insurance companies and Sino-foreign joint venture insurance companies apart from laws, administrative regulations or regulations formulated by the People's Bank of China.

   Article 89 The People's Bank of China is entitled to interpret or revise this set of regulations.

   Article 90 This set of regulations go into effect as from the date of promulgation.