Legal and regulatory framework | Doing Business with China

The PRC Property Insurance Contract Act (1983) and Provisional Regulation on the Administration of Insurance Enterprises (1985) (both recently abolished) were the first two- pillar documents outlining the legal framework of the insurance market in China. The Insurance Law of China (consisting of eight chapters) was promulgated in May 1995 and took effect in October of that year and is the most comprehensive legislation regulating the expanding insurance industry so far. The recently promulgated Administrative Rules on Foreign Invested Insurance Companies (2001) is the only legislation defining foreign invested insurance companies operating in China. However, this legislation is most likely to be transitional as more and more foreign companies push into the Chinese market and new problems begin to appear over time. For example, the current harsh restrictions on both domestic and foreign insurance firms may eventually be eased. The following is a list of the major Chinese laws and regulations in connection with insurance.

Insurance Law (1995)
Contract Law (1999)
Chapter 20 “ Maritime Law (1993)
Provisions on the Collection of Social Security Insurance Premium (1999)
Provisions on Unemployment Insurance (1999)
Company Law (1994)
Administrative Rules on Foreign Invested Insurance Companies (2001)
Administrative Rules on Insurance Brokerage Companies (2001)
Administrative Rules on Insurance Agency (2001)
Administrative Rules on Insurance Assessment Institutions (2001)
Provisions on Executive Review by China Insurance Regulative Commission (2001)
Notice Against Unfair Competition within the Insurance Industry (2001)
Provisional Rules on Intra-firm Insurance Agency (2001)
Administrative Rules on Insurance Assessors (2001).

Because China's insurance sector is still a young market, much of the legal framework remains to be consolidated. Old rules that cannot cope with the ongoing development are being phased out and a new wave of legislation phased in since the turn of the century. Most recently, a motion has been submitted to the People's National Congress, China's top legislature, to amend the Insurance Law. The proposed amendments include further liberalization of those areas such as insurance fund appropriation, the corporate structure and the regulatory process. Recent information reveals that it is highly likely the amendments will be approved.

1998 saw two dramatic restructuring events in the industry. Firstly, the People's Insurance Company of China (PICC), which dominated 80 per cent of the market, was split into four corporate entities with the parent company adopting the name of Chinese Insurance Group (CIG). Secondly, the government decided to separate the three financial industries of banking, securities and insurance and at the same time established government arms for their regulation and supervision. As a result, the Chinese Insurance Regulatory Commission (CIRC), a watchdog under the state council officially established in November 1998, is vested with the following responsibilities to regulate and supervise the insurance industry in China:

To formulate national strategies, policies, rules and regulations in areas concerning the insurance industry;
To conduct integrated supervision of the insurance market through a national network;
To examine and approve the establishment and reorganization of various insurance entities;
To examine and approve the appointment of senior executives in various insurance entities;
To formulate qualification criteria for professional positions in the insurance industry;
To formulate basic insurance terms and conditions as well as rates of premium for various lines of insurance operations, and to ensure conformance by the industry;
To formulate financial accounting standards and ensure conformance
To supervise the financial operation and indemnity capability of insurance entities;
To administer the indemnity and warranty fund deposited by insurance entities;
To conduct risk assessment and market surveillance through systematic analysis, scanning and forecasting in the insurance market;
To conduct statistics and news updates in the industry;
To be responsible for international exchanges and cooperation in the industry;
To handle complaints and disputes;
To administer industry associations and research institutions in the insurance field;
To execute any other matters designated by the state council.

The CIRC has ten functional departments in Beijing and retains 31 representative offices in most capital cities of each province , autonomous regions and centrally administered municipalities.