(Promulgated by Decree No.1 of the China Insurance Regulatory Commission on January 13, 2000 and entry into force on March 1, 2000)
Contents
Chapter I General Provisions
Chapter II Insurance Bodies
Chapter III Insurance Business
Chapter IV Insurance Clauses and Insurance Premium Rates
Chapter V Management and Utilization of Insurance Capital
Chapter VI Solvency of Insurance Companies
Chapter VII Reinsurance
Chapter VIII Supervision and Inspection
Chapter IX Penalty Provisions
Chapter X Supplementary Provisions
Chapter I General Provisions
Article 1
For the purposes of strengthening the supervision and administration of insurance companies, ensuring the normal order of the insurance market, protecting the legitimate rights and interests of the insured and promoting the healthy development of the insurance industry, and in accordance with laws and regulations such as the Insurance Law of the People's Republic of China (hereinafter cited as the Insurance Law) and the Company Law of the People's Republic of China (hereinafter cited as the Company Law), these Provisions are formulated.
Article 2
The China Insurance Regulatory Commission is the competent department for the commercial insurance throughout the country and under the authorization of the State Council, exercises the duties of supervision and administration over insurance companies according to law.
Article 3
Insurance companies carry on insurance business activities according to law and are free from any interference of various governmental departments, social groups and persons.
Article 4
In these Provisions, insurance companies mean various types of commercial insurance companies which are established with approval of the insurance regulatory department and are registered according to law.
In these Provisions, branches of insurance companies mean branch companies, sub-branch companies and business departments, which are set up by insurance companies through application and engage in insurance business according to law. Unless approved by the China Insurance Regulatory Commission, branches of insurance companies may not be in other forms,
In these Provisions, insurance bodies mean insurance companies and their branches.
Chapter II Insurance Bodies
Article 5
The establishment of insurance companies and setting up of branches of insurance companies must be subject to approval of the China Insurance Regulatory Commission.
Without such approval, no unit or person may engage in, directly or in a disguised manner, the commercial insurance business.
Article 6
The establishment of an insurance company must conform to the following principles:
1. to comply with laws, regulations and administrative rules concerning insurance;
2. to facilitate the stability of our country's insurance market and financial system;
3. to operate insurance and bank or securities separately; and to operate property insurance and life insurance separately; and
4. rational distribution and fair competition.
Article 7
In applying for the establishment of an insurance company, the following conditions shall be satisfied;
1. If applying for the establishment of an insurance company engaging in nationwide insurance business, the paid-in money capital may not be lower than 500 million renminbi yuan; and if applying for the establishment of an insurance company engaging in the business within a specified area, the paid-in money capital may not be lower than 200 million renminbi yuan;
2. Senior management personnel of the insurance company must meet the qualifications for the positions prescribed by the China Insurance Regulatory Commission;
3. If applying for the establishment of a nationwide insurance company engaging in life insurance business, it must have at least three actuaries approved by the China Insurance Regulatory Commission; and if applying for the establishment of a regional insurance company engaging in life insurance business, it must have at least one actuary approved by the China Insurance Regulatory Commission;
4. It has the business site and office equipment compatible to its business scale and number of employees;
5. Shareholders of an insurance joint-stock limited company shall be the enterprise legal persons or other organizations permitted by the State to make investment; and the qualifications of shareholders shall conform to the relevant regulations of the China Insurance Regulatory Commission; and
6. Other conditions required by the China Insurance Regulatory Commission.
Article 8
In applying for the preparation of an insurance company, the following documents shall be submitted in triplicate:
1. an application for preparation;
2. feasibility study report;
3. preparation program;
4. letters of intent for subscription of shares by investors and their background information, including the body's nature, organizational form, date of establishment, department of approval, legal representative and registered capital;
5. resumes of the persons responsible for preparation and the proposed chairman of the board of directors and general manager of the insurance company, and the certification of their own intention; and
6. other documents required by the China Insurance Regulatory Commission.
Article 9
Within six months from the day of receiving the application documents for the preparation of an insurance company, the China Insurance Regulatory Commission makes a decision to approve or deny; and if no reply is given as scheduled, it is deemed a deny.
If an application is denied, the applicant may not file the same application again within one year.
Article 10
If the preparation of an insurance company is approved by the China Insurance Regulatory Commission, the work of preparation shall be finished within six months. If the work of preparation is not finished as scheduled, the document of approval therefor ceases to be valid automatically. If the party preparing the company applies and with approval of the China Insurance Regulatory Commission, the preparation period may be extended by six months.
Within the preparation period, the body responsible for preparation may not carry on any insurance business or operation activity.
Article 11
After the work of preparation is finished, the insurance company may apply to start business and submit the following documents in triplicates to the China Insurance Regulatory Commission:
1. an application for starting business;
2. capital verification certificate issued by an capital verification body approved by the China Insurance Regulatory Commission, and photocopies of source vouchers on account entry of capital;
3. resumes of persons to be appointed as senior management personnel of the company, and information about departmental setup of the company and basic composition of employees;
4. documentary evidences of the ownership or the right to the use of business site;
5. articles of association of the company (draft);
6. the three-year business scheme and reinsurance plan;
7. insurance clauses and insurance premium rates for the types of insurance to operate;
8. report on computer equipment and software configuration; and
9. other documents required by the China Insurance Regulatory Commission.
Article 12
An insurance company may, depending on its needs of business development, apply for setting up of branches. Branches shall be the form of branch company, (center) sub-branch company or business department.
The general business department of the head office of an insurance company is responsible for the management of sub-branch companies and business departments in the city where the head office is located, and no branch company may be set up in the place where the head office is located.
Article 13
If an insurance company is established with the minimum amount of capital stipulated in paragraph 1 of Article 7 of these Provisions, the nationwide company may apply for setting up of three branch companies and the regional company may apply for setting up of two branch companies; in addition, whenever one branch company or one branch at or above the provincial level is applied to be set up, its capital shall increase by at least 50 million renminbi yuan.
If the capital of an insurance company has already satisfied the requirements in the preceding paragraph at the time of applying for setting up of an additional branch, it is not required to increase its capital.
If the capital of a nationwide insurance company reaches 1.5 billion renminbi yuan or the capital of a regional insurance company reaches 500 million renminbi yuan, it is required to increase its capital for its setting up of branches under the preconditions of adequate solvency.
Article 14
Applications for setting up of branches by insurance companies are filed in a unified way by their head offices with the China Insurance Regulatory Commission.
Article 15
When an insurance company applies for setting up of a branch, the following conditions shall be satisfied:
1. It facilitates the development of local insurance market;
2. Its head office has started business for one year or more and its capital conforms to the requirements of Article 13 of these Provisions;
3. It has a perfect internal control system, sound organizational operation and adequate solvency;
4. It has no serious illegal or irregularity act in the preceding two years, the superior body of the branch applied to be set up has passed the annual inspection;
5. It has senior management personnel for the branch who qualify for the positions as prescribed by the China Insurance Regulatory Commission;
6. The branch approved last time was successfully set up and now operates normally; and
7. It shall satisfy other conditions required by the China Insurance Regulatory Commission.
Article 16
An insurance company shall submit an official application when applying to set up a branch. The contents of the application include: scope of business; three-year business development scheme and market analysis, persons responsible for preparation, computer equipment plans and the intended site of office.
Article 17
The China Insurance Regulatory Commission examines and approves the applications of insurance companies for setting up of branches in accordance with the needs of market development and in consideration of the insurance companies' scale of premium revenues, solvency, operation efficiency, operation and management level, construction of internal control system, distribution and number of existing branches and others.
Article 18
Within three months after receiving an application for setting up of a branch, the China Insurance Regulatory Commission makes a decision to approve or deny. If no reply is given as scheduled, it is deemed a deny.
If an application is denied, the insurance company may not file an application of the same contents again within six months.
After its application is approved, the insurance company shall start the preparation of setting up of the branch. The preparation period may not exceed six months in general. If the work of preparation is not finished as scheduled, the document of approval therefor ceases to be valid automatically. If the insurance company applies and with approval of the China Insurance Regulatory Commission, the preparation period may be extended by three months.
Article 19
After the work of preparation for setting up of a branch is finished, the insurance company shall file an application for starting business with the China Insurance Regulatory Commission and apply for obtaining the Insurance Business Permit.
An application for starting business shall include: information about the finished work of preparation, scope of business, persons responsible for the branch, office site and relevant evidences, information about compute equipment and configuration, setup of internal departments and information about employees.
Article 20
The following changes of insurance companies shall be reported to the China Insurance Regulatory Commission for approval:
1. revision to the articles of association;
2. change of address;
3. increase or decrease of registered capital;
4. transfer of shares;
5. change of organizational form;
6. adjustment to the scope of business;
7. change of the company's name;
8. split or merger; and
9. other changes which are considered by the China Insurance Regulatory Commission necessary for approval.
Article 21
If a particular shareholder of an insurance joint-stock limited company (including its associated company or in the name of any other person) holds a total amount of shares of the insurance company exceeding 10% of the insurance company's capital, the matter must be approved by the China Insurance Regulatory Commission.
Article 22
Resolutions made by the meeting of the board of directors of an insurance company shall, within 15 days after the conclusion of the meeting of the board of directors, be reported to the China Insurance Regulatory Commission for the record.
Article 23
The following changes of branches of insurance companies shall be reported to the China Insurance Regulatory Commission for approval:
1. cancellation or merger of a branch;
2. change of a branch's name;
3. adjustment to the scope of business;
4. change of business site; and
5. other changes which are considered by the China Insurance Regulatory Commission necessary for approval.
Article 24
The examination and control of qualifications for positions of senior management personnel of insurance bodies are governed by the relevant provisions issued by the China Insurance Regulatory Commission.
Article 25
Insurance companies shall set up special customer service bodies or consulting and complaint department, and make public its telephone number for receiving complaints.
Article 26
An insurance joint-stock limited company shall, in offering new public shares, comply with the Company Law and the relevant provisions of the State on securities regulation, however, it may not offer new public shares under any of the following circumstances:
1. The company had serious illegal or irregular business or operation act in the preceding three years; or
2. The last offering of shares of the company was not fully subscribed for and it is less than two years since that offering.
If new shares offered are completely subscribed by its existing shareholders, profits are converted into new shares or new shares are paid out with public reserve fund, it is not restricted by the provisions of the preceding paragraph.
Article 27
The insurance permits are the legal documentary evidences of insurance bodies for engaging in insurance business. The insurance permits include the Legal Person Permit of Insurance Body and Insurance Business Permit. The Legal Person Permit of Insurance Body is the documentary evidence for the insurance company to engage in insurance business according to law, and the Insurance Business Permit is the documentary evidence for the branch of the insurance company to engage in insurance business according to law.
Article 28
When an insurance company is established with approval, the China Insurance Regulatory Commission issues the Legal Person Permit of Insurance Body thereto; and when a branch of an insurance company is set up with approval, the China Insurance Regulatory Commission issues the Insurance Business Permit thereto. Insurance companies and their branches shall, on strength of the document of approval and the Permit, accomplish the registration procedures with the administrative departments for industry and commerce and obtain the business licenses, and then may start business.
If a relevant change is approved, the insurance body must, on strength of the relevant document of approval and the original and duplicate of its Permit, has its Permit replaced by the China Insurance Regulatory Commission.
Article 29
The China Insurance Regulatory Commission designs, prints, issues, withholds, cancels or revokes insurance permits in a unified way according to law. No other unit or person may design, print, issue, withhold or seize insurance permits.
Article 30
Insurance companies and their branches shall place the original of their insurance permits at the noticeable place of business sites and properly keep the duplicate of the permits for reference and inspection.
Article 31
Insurance permits are replaced once every three years. In case of a loss, a statement shall be published in a newspaper designated by the China Insurance Regulatory Commission pronouncing it invalid within 15 days from the day of knowing the loss, and the written statements shall be made to the original issuing organ for a replacement.
Article 32
No insurance body may forge, alter, lease, lend, transfer or sell the insurance permit.
Article 33
The China Insurance Regulatory Commission collects fees from insurance bodies applying to acquire or replace the insurance permit according to the provisions.
Article 34
If an insurance company intends to set up a solely-invested or joint-venture company or a branch outside the territory, the matter shall be reported to the China Insurance Regulatory Commission for approval.
Article 35
If an insurance company cancels its overseas branch stipulated in Article 34 of these Provisions, it shall report to the China Insurance Regulatory Commission for approval; and if an overseas branch of an insurance company is revoked of its business license or is declared bankrupt by the overseas regulatory authorities, it shall be reported to the China Insurance Regulatory Commission for the record without delay.
Article 36
With approval of the China Insurance Regulatory Commission, insurance companies may set up representative offices. Representative offices are responsible for handling consulting, liaison and coordination of relevant matters of the insurance companies, however, they may not carry on insurance business and operation activities.
Setting up of representative offices outside the territory by insurance companies must be approved by the China Insurance Regulatory Commission.
Article 37
If an insurance company is dissolved according to law, revoked according to law or declared bankrupt according to law, the liquidation group shall, within 10 days from its formation, notify the creditors and publish announcements at least three times in a newspaper designated by the China Insurance Regulatory Commission.
Article 38
An insurance company which dissolves according to its articles of association or resolution of its board of directors shall file an application with the China Insurance Regulatory Commission and submit the following documents in triplicates:
1. an application for dissolution;
2. resolution of its board of directors;
3. liquidation procedures;
4. arrangement plan of its claims and debts;
5. composition of the liquidation group and person responsible therefor;
6. distribution plan of its assets; and
7. other documents required by the China Insurance Regulatory Commission.
Article 39
An insurance company which is dissolved or revoked according to law shall immediately stop acceptance of any new business and hand out its permit according to law.
Article 40
If an insurance company is dissolved or revoked according to law, a liquidation group shall be formed. The liquidation group shall employ the accountant firm, actuary firm and law firm approved by the China Insurance Regulatory Commission to assess the company's claims, debts and assets.
The China Insurance Regulatory Commission may supervise and direct the liquidation work.
Article 41
If an insurance company is dissolved or revoked according to law, the disposition of its assets shall adopt the method of public auction or bidding; if transfer by agreement is employed, it shall be reported to the China Insurance Regulatory Commission for the record.
Article 42
If an insurance company is dissolved or declared bankrupt according to law, the transfer plan of its insurance contracts shall be reported to the China Insurance Regulatory Commission for approval.
If an insurance contract is transferred according to the provisions of the preceding paragraph, the China Insurance Regulatory Commission may adjust the pre-set interest rates for long-term life insurance clauses.
Article 43
If an insurance company is dissolved according to law, shareholders of the company may not distribute the company's assets or obtain any interest from the company before the completion of liquidation of insurance contract liabilities.
Article 44
If an insurance company is dissolved according to law and it is found in the liquidation process that its assets are insufficient to offset debts, bankruptcy application shall be filed, the liquidation of assets and disposition of its claims and debts are governed by the bankruptcy procedures for insurance companies, unless laws, regulations or administrative rules provide otherwise.
Chapter III Insurance Business
Article 45
With approval of the China Insurance Regulatory Commission, a property insurance company may engage in all or part of the following businesses:
1. corporate property damage insurance;
2. family property damage insurance;
3. engineering project insurance
4. installation project insurance;
5. cargo transportation insurance;
6. motor insurance;
7. ship insurance;
8. aircraft insurance;
9. aerospace insurance;
10. nuclear power plant insurance;
11. energy insurance;
12. legal liability insurance;
13. general liability insurance;
14. guarantee insurance;
15. credit insurance;
16. planting industry insurance;
17. cultivation industry insurance;
18. other property insurance businesses approved by the China Insurance Regulatory Commission; and
19. reinsurance of the above insurance businesses.
Article 46
With approval of the China Insurance Regulatory Commission, a life insurance company may engage in all or part of the following businesses:
1. personal accident insurance;
2. personal fixed-term death insurance;
3. personal life and health insurance;
4. personal whole life insurance;
5. personal endowment insurance;
6. personal short-term health insurance;
7. personal long-term health insurance;
8. group accident insurance;
9. group fixed-term life insurance;
10. group whole life insurance;
11. group endowment insurance;
12. group short-term health insurance;
13. group long-term health insurance;
14. other life insurance businesses approved by the China Insurance Regulatory Commission; and
15. reinsurance of the above insurance businesses.
Article 47
With approval of the China Insurance Regulatory Commission, a reinsurance company may engage in all or part of the following businesses:
1. to accept outward reinsurance business from property insurance companies;
2. to accept outward reinsurance business from life insurance companies;
3. with approval of the China Insurance Regulatory Commission, to accept statutory reinsurance businesses from domestic insurance companies;
4. to handle reinsurance businesses transferred; and
5. to engage in international reinsurance business.
Article 48
If an insurance company applies to expand its scope of business, its capital, operation term and operation performance shall meet the relevant requirements of the China Insurance Regulatory Commission.
Article 49
If, with approval of the China Insurance Regulatory Commission and the State's administrative department of foreign exchange, an insurance company may engage in foreign exchange operations, its scope is limited to the head office only. If a branch of an insurance company needs to engage in foreign exchange operations, the matter shall be reported separately for approval.
Article 50
With approval of the China Insurance Regulatory Commission, a branch of an insurance company may engage in all or part of insurance businesses within the scope of business of its head office.
Article 51
An insurance body shall carry on insurance business within the area specified in the insurance permit.
Insurance companies which start business in large and medium cities shall set up corresponding branches.
Article 52
If two or more than two insurance companies take part in the co-insurance for the same insurance subject matter of special risks such as large project or satellite, or at least one of the insurance companies has obtained the insurance business permit in the place of location of the insurance subject matter, they are not restricted by the scope of areas for business operations.
Article 53
Insurance companies may provide inter-city insurance if a large industrial or commercial enterprise or a large project meets one of the following conditions:
1. The total insured amount of various property insurance of the said enterprise or project exceeds 500 million renminbi yuan; or
2. The total premium income from insurance listed above exceeds 1 million renminbi yuan.
Article 54
An insurance company may provide inter-city business in the form of blanket policy if any of the following conditions is satisfied:
1. In the case of a key construction project of the State, the insurance body in the place where the legal person of investment unit is located may provide relevant inter-city insurance business in the form of blanket policy.
2. If an insurance applicant legal person institution and principal insurance subject matter (more than 50% of the insured amount) are located within the scope of area of an insurance institution but some projects or part of the business operations not subject to independent accounting is located in other places, the said insurance body may, at the time of providing the local business, provide insurance for the above inter-city businesses simultaneously in the form of blanket policy.
Article 55
Insurance applicants may choose insurance companies to buy insurance on their own. Insurance companies may not compel in any form or compel in a disguised manner insurance applicants to buy insurance, unless laws and regulations provide otherwise.
Article 56
An insurance company may not entrust any insurance agent not approved by the China Insurance Regulatory Commission to carry on its business; may not accept any insurance business introduced thereto by any insurance broker not approved by the China Insurance Regulatory Commission; and may not pay insurance service fees, insurance commissions or similar fees to any illegal intermediary organization.
Article 57
An insurance company may not, for the purpose of squeezing out its competitors, carry on insurance business by abnormally lowering its premium rate or expanding the scope of insurance liability, and engage in maliciously price competition.
Article 58
No insurance company may cook up or disseminate misrepresented fact to harm the creditworthiness and reputation of any other insurance company.
No insurance company may use rulings or penalty decisions made by the China Insurance Regulatory Commission, other government departments or courts to attack competitors and gain commercial interests.
Article 59
An insurance company may not, for the purpose of seizing a bigger market share, tempt and persuade insurance applicants or the insured to dissolve insurance contracts already signed with other insurers.
Article 60
An insurance company may not make use of government departments, other state power organs, monopoly industries, departments or enterprises to illegally squeeze or obstruct any other insurance company to carry out normal insurance business activities.
Article 61
Insurance companies and their employees may provide insurance premium kickbacks or other illegal or irregular interests to the insurance applicants, the insured and beneficiaries; nor may they pay commissions or service fees to insurance agents in excess of the scope and standards.
Article 62
Promotional materials on insurance services of insurance companies shall be comprehensive, objective, complete and authentic. Insurance companies may not make use of advertisement or other means to make misleading publicity on the contents of insurance clauses and service quality.
Article 63
The promotional materials on insurance services of an insurance company shall bear the name of the insurance company, consulting and complaint telephone number and address.
The promotional materials on insurance services of an insurance company may not predict such uncertain insurance policy benefits as profits of the company and insurance policy dividend or refund of difference of interest rates; and may not exaggerate or exaggerate in a disguised manner insurance liability in publicizing the insurance products.
Article 64
Insurance companies shall give, in a reasonable way, special presentment on the responsibility exempt clauses and clauses on surrender of insurance policy and return of premiums in the insurance contracts.
An insurance company may not make partial or biased comparison between its insurance clauses and insurance premium rates and similar insurance clauses, insurance premium rate or interest rate of any other insurance company or financial institution.
Article 65
Insurance companies shall impose supervision and control over the business development acts of their insurance agents, and if finding insurance agents to have illegal or irregular acts, shall immediately stop or correct them.
Article 66
Associated transactions of insurance companies shall be reported to the China Insurance Regulatory Commission for approval.
Associated transactions prescribed in the preceding paragraph mean:
1. insurance or reinsurance business among the associated companies;
2. assets management, guarantee and agency business among associated companies; and
3. trading of fixed assets or transfer of claims and debts among the associated companies.
Transactions between an insurance company and other legal person institutions in which the chairman of the board of directors or general manager of an insurance company or their direct relatives hold positions shall be reported to the China Insurance Regulatory Commission for the record.
Chapter IV Insurance Clauses and Insurance Premium Rates
Article 67
The scope of "major types of commercial insurance" stipulated in Article 106 of the Insurance Law is determined by the China Insurance Regulatory Commission. The China Insurance Regulatory Commission may, in accordance with market conditions, adjust the scope of major types of insurance.
The China Insurance Regulatory Commission formulates and revises the basic insurance clauses and premium rates of major types of insurance. The China Insurance Regulatory Commission may authorize the association of insurance industry or insurance companies to draft the basic insurance clauses and premium rates for major types of insurance.
Article 68
Insurance clauses and premium rates for other types of insurance drafted by insurance companies shall be reported by their head offices to the China Insurance Regulatory Commission for the record. If the China Insurance Regulatory Commission does not raise objection within 30 days from the date of receiving application documents on the clauses and premium rates submitted for the record, the insurance company may use such clauses and premium rates.
Without authorization of the head office, any branch of an insurance company may not draft any insurance clause and premium rate on its own.
Article 69
If the insurance clauses and premium rates submitted for the record by an insurance company have any of the following circumstances, the China Insurance Regulatory Commission may require the insurance company to make change, and may also require the insurance company to stop the use:
1. violating the prohibitive provisions of laws, regulations or administrative rules;
2. violating relevant fiscal policies of the State;
3. impairing the social public interest;
4. having obvious unfair contents or price monopoly, impairing the lawful rights and interests of the insurance applicants, the insured or beneficiaries;
5. the premium rate is lower than the cost price, thus constituting unfair competition;
6. having improper clause designs or premium rate and preset interest rates, possibly harming the solvency of the insurance company;
7. having any other matter prescribed by the China Insurance Regulatory Commission.
Article 70
The China Insurance Regulatory Commission may issue standard clauses of property insurance or life insurance.
Article 71
The preset interest rates for insurance policies of long-term life insurance clauses drafted by life insurance companies may not be higher than relevant standards formulated by the China Insurance Regulatory Commission.
The tables on life expectancy used by life insurance companies shall be approved by the China Insurance Regulatory Commission.
Article 72
Insurance companies shall implement the uniform insurance clauses to the same type of insurance.
Insurance companies may, in accordance with local actual conditions, formulate locate premium rates and implement them after they are reported to and approved by the China Insurance Regulatory Commission. The China Insurance Regulatory Commission may also, in accordance with the actual conditions, specify the standard insurance premium rates or the up and low margins of insurance premium rates.
Article 73
In submitting, revising or adjusting the property insurance clauses and premium rates for the record, the insurance company shall submit the following documents:
1. documents in triplicates for the record of the insurance clauses and premium rates;
2. market forecast of insurance products, rate of loss of insurance subject matters in the preceding three years, predicted insurance compensation rate, various preset management fees and preset interest rates;
3. computation formula of premium rates and basis;
4. promotional materials on the said type of insurance; and
5. other documents required by the China Insurance Regulatory Commission.
Article 74
In submitting, revising or adjusting the life insurance clauses and premium rates for the record, the insurance company shall submit the following documents:
1. documents in triplicates for the record of the insurance clauses and premium rates;
2. market forecast of insurance products, preset interest rates, preset premium rates and life table to be used;
3. reserve fund of insurance premiums and insurance liability, the computation formula of cash value of insurance policies and methods;
4. promotional materials on the said type of insurance; and
5. other documents required by the China Insurance Regulatory Commission.
Chapter V Management and Utilization of Insurance Capital
Article 75
Insurance companies shall allocate guaranty fund according to law.
With approval of the China Insurance Regulatory Commission, insurance companies may deposit their guaranty fund with negotiable instruments approved by the China Insurance Regulatory Commission.
Article 76
Various insurance liability reserve funds allocated by insurance companies must be authentic and adequate.
Article 77
Insurance companies shall allocate reserve funds for outstanding compensation according to insurance compensation already claimed or the amount of payment; Regarding reserve funds for insurance compensation not yet claimed for the insurance accidents already occurred or compensation payable for accidents already occurred but not yet reported, the amount shall be computed and allocated at not exceeding 4% of the actual amount of compensation paid in the current year.
Article 78
Public accumulation fund of an insurance company shall be used to offset the company's losses, or converted to increase the company's capital.
When an insurance company transforms its public accumulation fund into capital under the resolution of the shareholders assembly, new shares shall be given out or par value of each share shall be increased according to the percentage of original shares held by the shareholders. However, when statutory public accumulation fund is changed into capital, the said public accumulation fund to be retained may not be less than 25% of its registered capital.
Article 79
Unless approved by the China Insurance Regulatory Commission, capital, public accumulation fund and reserve fund for various insurance liability of insurance companies shall be utilized in the territory of China.
Article 80
The utilization of insurance capital is restricted to:
1. bank deposits;
2. trading of government bonds;
3. trading of financial bonds;
4. trading of bonds of the central enterprises designated by the China Insurance Regulatory Commission; and
5. other capital utilization prescribed by the State Council.
The capital utilization of insurance companies shall conform to laws, regulations and relevant provisions of the China Insurance Regulatory Commission.
Chapter VI Solvency of Insurance Companies
Article 81
Insurance companies shall have the minimum solvency comparable to their scales of business.
Article 82
The actual solvency of an insurance company is the difference of its actual assets value at the end of the accounting year minus its actual liabilities.
The categories and approved ratio of the actual assets referred to in the preceding paragraph are provided for by the China Insurance Regulatory Commission, and the actual assets value is the sum of all categories of assets approved.
Article 83
The minimum solvency position for property insurance or short-term life insurance business is the larger one of the following two sub-paragraphs:
1. 18% of the part below 100 million yuan and 16% of the part above 100 million yuan after deducting premium taxes from the self-retained premiums for the current accounting year;
2. 26% of the part of average compensation payment in the past three years if the amount is below 70 million renminbi yuan and 23% if the amount is above 70 million renminbi yuan.
If the operating period of an insurance company is not yet up to three years, it shall apply the standard specified in sub-paragraph 1.
Article 84
The minimum solvency position for long-term life insurance business is the sum of numbers of the following two sub-paragraphs:
1. 4% of life insurance liability reserve fund at the end of accounting year for general life insurance business and 1% of life insurance liability reserve fund at the end of accounting year for connected investment operations;
2. 0.1% of risk amount for fixed-term death insurance with an insurance period less than three years, 1.5% of risk amount for fixed-term death insurance with an insurance period ranging from three to five years and 3% of risk amount for fixed-term death insurance with an insurance period exceeding five years and risk amount of other types of insurance.
If the insurance period is not differentiated for fixed-term death insurance in statistics, it shall be computed uniformly at 0.3% of risk amount.
Article 85
If the actual solvency of an insurance company is lower than the standards in these Provisions, it shall be handled according to the following methods:
1. If the actual solvency position is lower than the minimum solvency position, the insurance company shall take effective measures to make its solvency reaching the minimum standards on solvency, and make explanations to the China Insurance Regulatory Commission.
2. If the actual solvency position is 50% lower than the minimum solvency position, or the actual solvency position is lower than the minimum solvency for three consecutive years, the China Insurance Regulatory Commission may put the said company under priority supervision and inspection.
Within the period of priority supervision and inspection, the insurance company may not apply to set up any branch or pay any dividend or distribute dividend, the China Insurance Regulatory Commission may order it to improve its solvency conditions in such means as placing for reinsurance, transfer of business, suspension to accept any new business, capital increase or share expansion or adjustment in assets structure.
3. If the actual solvency position is equivalent to 30% or less of the minimum solvency position, or if the financial conditions of an insurance company under priority supervision and inspection continue to deteriorate, which is likely or has already harmed the interests of the inured and the social public, the China Insurance Regulatory Commission may take over the said insurance company.
Chapter VII Reinsurance
Article 86
Except for life insurance business, insurance companies must place out 20% of each of their insurance operations for statutory reinsurance to reinsurance companies designated by the China Insurance Regulatory Commission.
Article 87
Prior to November 1 each year, insurance companies shall submit their reinsurance plans for the following year to the China Insurance Regulatory Commission for approval. If a reinsurance plan needs to be adjusted, it must also be reported to the China Insurance Regulatory Commission for approval.
A reinsurance plan of insurance companies shall include such contents as contract reinsurance, schedule for the use of foreign exchange, self-retained amount of premiums and temporary reinsurance program.
Article 88
If an insurance company needs to carry on outward reinsurance business, it shall give priority in placing out reinsurance with insurance companies in the territory of the People's Republic of China; however, if the conditions offered by a foreign insurance company for reinsurance are remarkably preferential, it may place out reinsurance with the foreign insurance company.
Under the same conditions, inward reinsurance companies shall give priority in accepting the outward business from domestic insurance companies. When an inward reinsurance company needs to reinsure again the reinsurance business it has accepted, it shall give priority in placing out reinsurance with domestic insurance companies.
Article 89
The outward or inward reinsurance business among associated insurance companies shall be reported to the China Insurance Regulatory Commission for approval.
Chapter VIII Supervision and Inspection
Article 90
The supervision and administration over the insurance industry by the China Insurance Regulatory Commission follow the principle of equal importance of supervision and regulation over market acts and supervision and regulation over solvency.
Insurance companies shall, according to law, accept the supervision and inspection imposed by the China Insurance Regulatory Commission.
Article 91
The supervision and inspection over insurance bodies by the China Insurance Regulatory Commission comply with the mode of the combination of on-spot supervision and regulation and non-on-spot supervision and regulation.
Article 92
The China Insurance Regulatory Commission imposes the routine and annual inspection system on insurance bodies. The annual and routine inspection over insurance bodies include all or part of the following matters:
1. compliance with the examination and approval procedures for the establishment or change of a body;
2. consistence of the contents of application materials and the actual situation;
3. truthfulness and adequateness of the capital, public accumulation fund and various reserve funds;
4. conformity to the requirements of the solvency;
5. goodness of the business operations and financial conditions, and completion and authenticity of the reports and statements;
6. business operations within the scope or area;
7. implementation of the insurance clauses and premium rates according to the provisions;
8. compliance with the formalities for the appointment or change of person responsible for the body;
9. conformity to the requirements of the business site and safety facilities; and
10. other matters deemed by the China Insurance Regulatory Commission necessary for inspection.
Article 93
Within 15 days after receiving the notification for annual inspection, an insurance body shall submit the following materials to the China Insurance Regulatory Commission or its agency;
1. report for annual inspection;
2. assets-liability statements and profits statements;
3. duplicates of Legal Person Permit of Insurance Body and Insurance Business Permit; and
4. other materials required by the China Insurance Regulatory Commission.
Article 94
If an insurance body passes annual inspection, the China Insurance Regulatory Commission affixes its official seal on the duplicate of its permit; if an insurance body fails to pass annual inspection, it is ordered to make corrections within a given time limit.
Article 95
The China Insurance Regulatory Commission may put an insurance body under priority inspection for any of the following circumstances:
1. having a serious illegal or irregular act;
2. having an abnormal financial situation;
3. failing to submit any statement as required;
4. failing to implement the insurance clause, premium rate, reinsurance plan or any other plan or scheme approved or verified by the China Insurance Regulatory Commission; or
5. having any other circumstance deemed by the China Insurance Regulatory Commission necessary for priority inspection.
Article 96
The China Insurance Regulatory Commission may impose inspection on insurance bodies at any time. Insurance bodies must render cooperation and provide relevant documents and materials as required by the China Insurance Regulatory Commission.
Article 97
When the persons of the China Insurance Regulatory Commission inspect the work, they shall produce their certificates and papers. When the China Insurance Regulatory Commission authorizes accountant firms and auditors' firms to perform inspection on its behalf, the form of written authorization shall be employed.
Article 98
Insurance companies shall submit their business operation reports, actuarial reports, financial accounting reports and related business supervision statements to the China Insurance Regulatory Commission in time as required.
Article 99
Various statements and business operation reports submitted by insurance companies to the China Insurance Regulatory Commission shall be complete, authentic and accurate.
Article 100
Business operation reports, financial accounting reports and related statements of insurance companies shall bear the signatures of legal representatives or general managers of the companies and the signatures of certified public accountants approved by the China Insurance Regulatory Commission. The actuarial reports of life insurance companies shall bear the signatures of the actuaries approved by the China Insurance Regulatory Commission. Reports and statements of branches of insurance companies shall bear the signatures of the persons responsible for bodies authorized by the superior companies and the companies' stamps.
Chapter IX Penalty Provisions
Article 101
If, in violation of laws or regulations on insurance or these Provisions, an insurance body carries on an insurance business activity, the China Insurance Regulatory Commission imposes the following administrative penalties according to law on the said insurance body or the persons responsible:
1. warning or ordering to make corrections;
2. confiscation of illegal gains;
3. fine;
4. revocation of the qualifications for positions of its senior management personnel;
5. restricting its scope of business, or ordering it to stop acceptance of new business;
6. ordering to suspend business for rectification; or
7. revoking the insurance permit and being banned.
Article 102
If, in violation of the provisions of Article 5 of these Provisions, an insurance company is established without approval or a commercial insurance business activity is carried on illegally, criminal responsibilities are demanded for according to law and the said company or activity is banned. If no crime is constituted, the illegal gains are confiscated and a fine exceeding one times but not exceeding five times of the illegal gains is imposed concurrently; if there is no illegal gain, a fine exceeding 100,000 yuan but not exceeding 500,000 yuan is imposed thereon.
Article 103
If, in violation of the provisions of Article 5 or 36 of these Provisions, an insurance company sets up a branch or representative office without approval, it is ordered to make corrections, the branch or representative office illegally set up is banned, and concurrently a fine exceeding 50,000 yuan but not exceeding 300,000 yuan is imposed thereon; and if the circumstance is serious, its scope of business may be restricted, its acceptance of new business may be ordered to stop or its insurance permit may be revoked.
If, in violation of the provisions of Article 34 or 35 of these Provisions, an overseas body is set up or cancelled without reporting for approval or for the record as required, a warning is given and a fine exceeding 50,000 yuan but not exceeding 300,000 yuan is imposed concurrently; and if the circumstance is serious, the scope of business may be restricted, acceptance of new business may be ordered to stop or the insurance permit may be revoked.
Article 104
If, in violation of the provisions of Article 20 or 23 of these Provisions, it is ordered to make corrections; and if it fails to respond as scheduled, it is given a warning and imposed a fine exceeding 10,000 yuan but not exceeding 100,000 yuan concurrently.
Article 105
If, in violation of the provisions of Article 45, 46, 47, 48, 50 or 51 of these Provisions, an insurance business is carried on beyond the approved scope or area of business without approval, a warning is given and corrections are ordered to make; illegal gains, if any, are confiscated and a fine exceeding one times but not exceeding five times of illegal gains is imposed concurrently; if no illegal gains are got, a fine exceeding 100,000 yuan but not exceeding 500,000 yuan is imposed thereon; and if no corrections are made as scheduled or serious consequence is caused, business may be ordered to suspend for rectification or the insurance permit may be revoked.
Article 106
If, in violation of the provisions of Article 55 of these Provisions, an insurance body compels in an illegal manner or compels in a disguised manner the applicant to buy insurance, it is given a warning, ordered to make corrections and confiscated of its illegal gains; and if the circumstance is serious, a fine exceeding one times but not exceeding three times of its illegal gains is imposed thereon, and if it has no illegal gains, a fine exceeding 5,000 yuan but not exceeding 30,000 yuan is imposed thereon.
Article 107
If, in violation of the provisions of Article 57 or 60 of these Provisions, unfair competition is done, a warning is given, the illegal gains, if any, are confiscated and a fine exceeding one times but not exceeding five times of the illegal gains may be imposed concurrently; if it has no illegal gains, a fine exceeding 50,000 yuan but not exceeding 200,000 yuan is imposed thereon; and if the circumstance is serious, it may be ordered to suspend business for rectification or revoked its insurance permit.
If an insurance company engages in an associated transaction, thus harming the normal operation of any other insurance company, it is deemed an unfair competition act and is punished according to the provisions of the preceding paragraph.
Article 108
An insurance body is, if violating the provisions of Article 58, 59, 62 or Paragraph 2 of Article 64 of these Provisions, ordered to make corrections and to eliminate influence, and concurrently imposed a fine exceeding 10,000 yuan but not exceeding 200,000 yuan.
Article 109
An insurance body is, if violating the provisions of Article 56 of these Provisions, given a warning, ordered to make corrections and concurrently imposed a fine exceeding one times but not exceeding three times the amount of payment.
Article 110
An insurance body is, if violating the provisions of Article 61 of these Provisions, given a warning, ordered to recover the kickbacks, commissions, service fees or other benefits it paid, and concurrently imposed a fine equivalent to the amount of payment.
Article 111
An insurance body is, if violating the provisions of Article 75, 76, 77, 80, 86, 87 or 88 of these Provisions, ordered to make corrections and concurrently imposed a fine exceeding 50,000 yuan but not exceeding 300,000 yuan; and if the circumstance is serious, its scope of business may be restricted, its acceptance of new business may be ordered to stop or its insurance permit may be revoked.
Article 112
An insurance body which, in violation of these Provisions, has any of the following acts, is ordered to make corrections and, if it fails to respond as scheduled, it is given a warning and concurrently imposed a fine exceeding 10,000 yuan but not exceeding 100,000 yuan:
1. failing to submit a relevant report, statement, document or information as required;
2. failing to submit the drafted insurance clause or premium rate for the record as required; or
3. engaging in an associated transaction without approval.
Article 113
An insurance body which, in violation of these Provisions, has any of the following acts, is ordered to make corrections and, if it fails to respond as scheduled, it is given a warning and concurrently imposed a fine exceeding 100,000 yuan but not exceeding 500,000 yuan:
1. submitting a false report, statement, document or information; or
2. refusing or obstructing inspection and supervision conducted according to law.
Article 114
Senior management personnel of an insurance body and other persons directly responsible for the act of violating these Provisions are, depending on the seriousness of the circumstance, given warning, revoked their qualifications for positions as senior management personnel and separately or concurrently, imposed a fine exceeding 5,000 yuan but not exceeding 30,000 yuan by the China Insurance Regulatory Commission.
Chapter X Supplementary Provisions
Article 115
These Provisions are applicable to the administration of foreign-capital insurance companies, unless laws, regulations or the China Insurance Regulatory Commission provide otherwise.
In regard to insurance business and operation activities of branch companies of foreign insurance companies which are set up in China with approval, the provisions of relevant laws and regulations shall apply thereto if such provisions are available and; if relevant laws and regulations remain silence, these Provisions shall apply thereto.
Article 116
All reports, statements and materials submitted by foreign insurance companies to the China Insurance Regulatory Commission shall be written in Chinese language. If the original text is in a foreign language, the versions of Chinese translation shall be accompanied; and in the case of any inconsistency between the meanings of Chinese and those of foreign language, the former shall prevail.
Article 117
Agencies of the China Insurance Regulatory Commission represent the China Insurance Regulatory Commission to exercise functions and powers within the scope of authorization.
Article 118
These Provisions are interpreted by the China Insurance Regulatory Commission.
Article 119
These Provisions enter into force on March 1, 2000.
