Karl Zhang
On March 18, 2020, the China Banking and Insurance Regulatory Commission (the “CBIRC”) promulgated the Interim Measures for the Administration of Insurance Asset Management Products (the “Measures”), which will come into effect on May 1, 2020. The Measures are highlighted below:
1. Defining insurance asset management products and their scope
The Measures define the business of insurance asset management products as providing financial investment and management services where an insurance asset management institution is designated by an investor pursuant to the law and the relevant contract to establish an insurance asset management product and serve as the administrator in the investment and management of the investor’s assets. In addition, the Measures specify that insurance asset management products include debt investment plans, equity investment plans, portfolio products and other products stipulated by the CBIRC.
2. Issuance, registration and custody of products
An insurance asset management institution engaged in the business of insurance asset management products shall conduct its issuance, registration, custody, transaction, settlement, information disclosure, etc. on the asset registration and trading platforms established by Shanghai Insurance Exchange Co., Ltd., PICC Insurance Asset Registration and Trading System Co., Ltd., or any other platform recognized by the CBIRC ( the “Platforms”).
An insurance asset management institution may, in accordance with the relevant laws, administrative regulations and the provisions of the CBIRC, retain a specialized service provider to provide professional services concerning its offered insurance asset management products, such as independent oversight, credit evaluation, investment consulting, legal services, financial audit and asset appraisal.
3. Sales of insurance asset management products
Insurance asset management institutions may sell insurance asset management products on their own, or they may entrust qualified financial institutions or other institutions recognized by the CBIRC to sell insurance asset management products. Insurance asset management institutions and entities retained for sales shall be honest and trustworthy, diligent and responsible, prevent conflicts of interest, perform their disclosure, anti-money laundering and other relevant obligations, and be responsible to conduct investor suitability review, product recommendations, and investor eligibility confirmation. They shall also assess the risk tolerance of natural person investors, and only sell investors products that are compatible with the investor’s risk profile. The specific rules for product sales shall be separately formulated by the CBIRC pursuant to law.
4. Provisions relating to investor eligibility
Insurance asset management products shall be issued only to eligible investors in a non-public manner. “Eligible investor” means a natural person, legal person or any other organization that has a corresponding risk profile, invests not less than a certain amount in a single product, and meets the following conditions; (1) a natural person having two or more years of investing experience and either has family financial net assets of not less than RMB 3 million, or the average annual income of the investor in the most recent three years is not less than RMB 400,000; (2) a corporate entity with net assets of no less than RMB 10 million at the end of the most recent year; (3) an institution regulated by a financial regulatory authority and its asset management products; (4) basic pension funds, social security funds, business pension funds and other kinds of pension funds; and (5) investors otherwise deemed eligible by the CBIRC.
5. Scope of insurance asset management products
Insurance asset management products can invest in national debt, local government bonds, central bank notes, government agency bonds, financial debentures, bank deposits, large certificates of deposit, interbank deposits, corporate credit bonds, securitized products issued in markets approved by the State Council such as the interbank bond market, stock exchange market, etc., publicly-offered security investment funds, other debt assets, equity assets, and any other assets recognized by the CBIRC. The scope of investment for the products shall comply with the relevant regulations governing the use of insurance funds.
Generally speaking, the Measures set out rules regarding eligible investors, investment scope, operational management for the investment products, the persons engaged in the business, and information disclosure, thereby providing a unified standard for insurance asset management products and clearer regulatory guidance for compliance management by insurance asset management services.