On November 24, 2021, the China Banking and Insurance Regulatory Commission (the “CBIRC”) promulgated the Measures for the Supervision and Administration of Insurance Group Companies (the “Measures”), which went into effect on the day of promulgation. The Measures are highlighted below:
1. Definition of “insurance group company”, “insurance group”, and “insurance group member company”
An insurance group company refers to a registered company established with the approval of the CBIRC with words such as “insurance group” or “insurance holding” in its name, which exerts control, joint control, or material influence on the member companies of the insurance group. An insurance group means a collective of enterprises consisting of an insurance group company and companies under its control, joint control or material influence, with two or more insurance company subsidiaries in addition to the insurance group company, and whose primary business is the insurance business. Insurance group member companies refer to the insurance group company, the subsidiaries directly or indirectly controlled by the insurance group company, and other member companies of the insurance group.
2. Establishment and approval
An insurance group company may be established in two ways – promotion or renaming – via an application filed with the CIRBC for approval and shall meet specific statutory requirements, including but not limited to: (1) the investor meets the shareholder qualifications of an insurance company as prescribed by the CBIRC, has a reasonable shareholding structure, and controls a total of 50% or more of shares in two domestic insurance companies at a minimum; (2) the minimum amount of registered capital is RMB 2 billion; (3) the investor has directors, supervisors and senior executives who meet the qualifications for those positions as prescribed by the CBIRC; and (4) the investor has a sound corporate governance structure and organizational structure, effective risk management, internal control management systems, etc.
3. Operating rules
The business of an insurance group company shall be focused on equity investment and management. An insurance group company shall use its own funds to make major equity investments. Major equity investment refers to an act of investment by which control is exerted over the invested enterprise.
An insurance group company may invest in the following insurance companies: (1) insurance companies; (2) insurance asset management institutions; (3) professional insurance agencies, insurance brokerage institutions, and insurance adjustment institutions; and (4) other insurance companies established with the approval of the CBIRC. An insurance group company may invest in non-insurance financial enterprises, but the aggregate book balance of major equity investments made by an insurance group company and its subsidiaries in domestic non-insurance financial enterprises shall not exceed 30% of the group’s consolidated net assets at the end of the previous year; an insurance group company and its subsidiaries may also invest in non-financial enterprises related to the insurance business as stipulated by the Measures. Finally, an insurance group company may engage in offshore investment, but the aggregate book balance of the major equity investments in offshore entities by an insurance group company and its domestic subsidiaries shall not exceed 10% of the group’s consolidated net assets at the end of the previous year.
4. Corporate governance
An insurance group company shall establish a corporate governance framework that satisfies the requirements under laws, administrative regulations, and other regulatory provisions. The insurance group company shall have a concise, clear, and penetrable shareholding structure. In principle, the hierarchy of equity control between an insurance group company and its financial subsidiaries shall not exceed three levels, and such hierarchy with its non-financial subsidiaries shall not exceed four levels. There should not be any cross-shareholding among the member companies of the insurance group in principle, and no subsidiary or other member company may hold shares of the insurance group.
5. Administration of non-insurance subsidiaries
An insurance group company may invest directly or indirectly in non-insurance subsidiaries. Specific forms of non-insurance subsidiaries for investment include: (1) shared service subsidiaries that mainly provide information technology services, auditing, policy management, crisis management, property/estate management, and other types of services and management for the insurance group member companies; (2) non-insurance subsidiaries established to make major equity investments in accordance with the CBIRC’s regulatory provisions on the use of insurance funds; and (3) other subsidiaries stipulated by laws, administrative regulations and the CBIRC.
An insurance group company shall establish a sound internal management system, clearly set out the scope of authority, processes and responsibilities for the management of non-insurance subsidiaries, and properly perform its main responsibilities for managing non-insurance subsidiaries.