1. The establishment of China Insurance Information Technology Management Co. Ltd.
China Insurance Information Technology Management Co. Ltd. (“CIITM”) was established on Jan. 15th . 2014, directly under China Insurance Regulatory Commission, funded by China Insurance Protection Fund Co. Ltd., with a registered capital of RMB 2,000,000,000. CIITM is mainly focused on the construction, operation and management of insurance information sharing platform. By means of information technology, CIITM will collect insurance operation data, establish standardized and systematic data system and provide fundamental network support and information services to the development and supervision of the insurance industry.
DeHeng Comments： The establishment of CIITM will contribute to information-modernization of the insurance industry of China.
2. The establishment of AXA Tianping P&C Insurance Co., Ltd.
Event Introduction：AXA Tianping P&C Insurance Co., Ltd. (“AXA Tianping”) was established in February 2014. AXA Tianping is a merger of Tianping Auto Insurance Co. Ltd. (“Tianping Auto”), the original first professional auto-insurance corporation of China, and AXA Group’s (the biggest insurance group in the world) wholly owned property insurance subsidiary in China. After increasing 216,216,216 shares, Tianping Auto absorbed AXA Insurance Co. Ltd., which changed its registered capital into RMB 846,216,216. By purchasing 33% of Tianping Auto’s equity (with a price of RMB 1,900,000,000) and then investing another RMB 2,000,000,000 to the latter, AXA Group now holds 50% of Tianping Auto’s equity and becomes its dominant shareholder. AXA Tianping, which is the largest foreign property insurance company in China, with its headquarter based in Shanghai Pudong Lujiazui Financial District, mainly focuses on motor vehicle traffic accident liability compulsory insurance, commercial motor vehicle insurance and enterprise property insurance, family property insurance, cargo insurance, liability insurance, short-term accident insurance, health insurance ect..
DeHeng Comments： AXA Tianping, established to be the largest foreign property&causality insurance company, which positively develops direct marketing business online, is worth paying attention to.
3. Commercial Auto Insurance Premium Rate Reform Started
Time: July, 2014
Event Introduction： In July, 2014, China Insurance Regulatory Commission released the Guiding Opinions on Deepening the Commercial Auto Insurance Clauses and Premium Rate Management System Reform (Draft for Comment) ( the “Guiding Opinions”) to property&causality insurance companies, which plans to divide commercial auto insurance premium rate into three parts, namely, standard pure risk premium, standard additional charges and rate adjustment coefficient. According to the Guiding Opinions, a standardized, personalized commercial auto insurance clause system will be established, with industry demonstration clause as its main body and innovative clauses as a supplement. Property insurance companies will be granted a gradually expanded power on deciding the commercial auto insurance premium rate, and a high market-oriented commercial auto insurance premium rate performing system will be finally established.
DeHeng Comments： Commercial auto insurance premium rate reform will lead to the formation of a market-oriented commercial auto insurance premium rate, which will be helpful for the protection of the rights and interests of auto insurance consumers.
4. The Issuing of the “New National Ten Clauses” Drafts a Blueprint of Modern Insurance Service Industry of China
Event Introduction： On Aug. 13th, 2014, the State Council formally issued Several Opinions on Accelerating the Development of Modern Insurance Services (Guofa  No.29), which is also known as “New National Ten Clauses” in insurance industry. The “New National Ten Clauses” puts forward the target of changing China from an “Insurance Giant” to an “Insurance Power”, which means, by the year 2020, insurance depth (premium income / gross domestic product) shall reach 5%, premium density (premium income / total population) shall reach RMB 3500 / person, and insurance’s function on social stabilization and economy promotion shall be given full play.
The “New National Ten Clauses” requires that commercial insurance shall become an important pillar of the social security system, endowment insurance products and services shall be further innovated, diversified health insurance services shall be developed, insurance people's livelihood security network shall be established and a multi-level social security system shall be improved; insurance mechanism shall be used in the innovation of the way of providing public service, liability insurance shall play a role in resolving contradictions and disputes, and insurance shall play its function of risk management to improve social management system; catastrophe insurance system shall be established, insurance shall be put into disaster accident prevention and relief system, the insurance economic compensation mechanism shall be improved, the degree of insurance’s participation in disaster rescue shall be increased; agricultural insurance shall be developed, both the scope and depth of “three-agriculture” shall be extended, the way of “supporting and benefiting farmers” shall be innovated; the unique advantages of long-term investment of insurance capital shall be given full play, the coordinated-development of insurance market, monetary market and capital market shall be improved, the economic structure of insurance service shall be adjusted, the speed of enterprises’ “going out” program shall be increased, the functions of insurance service shall be further developed, so that the quality of economy will be improved, the efficiency of the economy will be increased and the level of economy will be upgraded; the reform of the insurance industry shall be deepened, the level of opening-up of the insurance industry shall be promoted, innovation of insurance products and services shall be encouraged, reinsurance market shall be developed, the function of insurance intermediary market shall be given full play, the reform and opening-up of insurance industry shall be promoted, and the development level of the entire industry shall be improved; modernization of the supervision system and supervision capability shall be promoted, the protection of the rights and interests of insurance consumers shall be strengthened, the bottom line of occurring systematic and regional financial risk shall be guaranteed, insurance supervision shall be strengthened and improved, and risks shall be prevented and resolved; credit system construction of insurance industry shall be promoted, infrastructure construction of insurance industry shall be strengthened, insurance awareness of the whole society shall be improved, and the development environment of insurance industry shall be optimized; the insurance regulatory coordination mechanism shall be established, the governments shall be encouraged to buy insurance services through various ways, tax policy’s function in speeding up the development of the modern insurance service industry shall be studied, land protection of pension industry and health service industry shall be strengthened, finance allowance policy of agricultural insurance shall be improved, and supporting policy of modern insurance service industry development shall be improved.
DeHeng Comments： “New National Ten Clauses” drafts a grand blueprint and the implementation direction for modern insurance service industry of China.
5. Pingan Insurance Issued Incentive Plan for Key Staff
Event Introduction: On Oct. 28th, 2014, Pingan Insurance (Group) Company of China, issued a stock ownership plan (the “Plan”) for its key staffs. Covering 1000 key staffs, this plan encourages management members and key staffs to purchase company stocks with their payment and performance bonuses voluntarily. Over 80% of these 1000 key staffs are department responsible person of the Group and professional companies, which also include some senior professional and technical staffs. It is required that the increasing amount shall not exceed 10% of the total share capital, and the amount held by each staff accumulatively shall not exceed 1% of the total share capital. Taking A-share price of the date of 28th as the buying rate, the highest amount of Pingan stock held by one key staff may be RMB 3,200,000,000.00. Stock amount held through this Plan does not include IPO shares, stocks purchased from the secondary market or stocks obtained from equity incentive plan. There is a 12 month’s lock-up period for the stocks obtained through this Plan.
DeHeng Comments： As the leader of Chinese insurance industry, by issuing the “Incentive Plan”, Ping An sets a good example for personnel management and incentive mechanism of key staffs for Chinese insurance companies.
6. A Full Set of Standard System of “Solvency II” Almost Completed
Time: November, 2014
Event Introduction: On Nov. 6th , 2014, China Insurance Regulatory Commission issued the Solvency Regulatory Rules for Insurance Companies No. [×]: Solvency Status Reports (Draft for Comment) (the “Draft”). Thus all technical standards (totally 17 regulatory rules) of the “Three Pillars” of “Solvency II” have been released.
“Solvency II” is a financial supervision system completely and independently developed in China. Compared with “Solvency I”, “Solvency II” adopted a risk-oriented model instead of a scale-oriented model. The core of “Solvency II” is the supervision system of “Three Pillars”, which respectively are the＂First Pillar＂ (Quantitative Capital Requirements), the “Second Pillar” (Qualitative Regulatory Requirements), and the “Third Pillar”(Market Restraint Mechanism).
The First Pillar covers quantitative capital requirements, including insurance risk capital, credit risk capital, market risk capital, macro prudential capital and regulatory capital, balance assessment standards, assessment standards of real capital, capital classification, dynamic solvency testing, and regulatory measures.
The Second Pillar covers solvency capability assessment/ comprehensive risk rating (quantitative evaluation on quantifiable risk and qualitative evaluation on non-quantifiable risk), risk management requirements and assessments on insurance DeHeng Law Offices 6 companies (governance structure, internal control, management structure and processes), supervision, inspection and analysis, and regulatory measures.
The Third Pillar commits to improve market restraint mechanism via various measures, among which including external information disclosure, information exchange and credit rating.
DeHeng Comments： The establishment and implementation of the system of “Solvency II” will help to improve the safety of Chinese insurance industry, and the level of risk-oriented management framework of insurance companies.
7. The Establishment of China Agriculture Insurance Reinsurance Community
Time: November, 2014
Event Introduction: On Nov. 21st , 2014, China Agriculture Insurance Reinsurance Community (the “Community”) was established in Beijing. The Community was co-established by 23 agricultural insurance companies such as People’s Insurance Company of China Property and Casualty Company Limited (“PICC P&C”), and China Property Reinsurance Company (“CPRC”). In the founding conference, the above 24 companies signed the Articles of Association, passed related regulations and rules, selected PICC as the First presidency and CPRC as the management body of the Community.
DeHeng Comments： The establishment the Community, as a kind of mechanism innovation, marks that Chinese agricultural insurance development entered a new level.
8. Anbang Insurance Co. Ltd. Purchased Overseas Real Estate and Domestic Financial Enterprises on a Large Scale
Time: October-December, 2014
Event Introduction: On Oct. 6th, 2014, Anbang Insurance Co. Ltd. (“Anbang”) purchased New York Waldorf Astoria Hotel from Hilton for about USD 1,950,000,000. On Dec.16th, 2014, Anbang declared to buy Delta Lloyd Bank of Belgium for about USD 219,000,000, which once again obtained 100% equity of a Belgian financial institution after its acquisition of the century-old insurance company, FIDEA.
On Dec. 19th, 2014, Anbang increased its proportion of shareholding in China Minsheng Bank and Financial Street. After increasing holding, Anbang is still the largest shareholder of Minsheng Bank. And, by increasing its holding to 20%, Anbang becomes the second largest shareholder of the Financial Street. On Dec. 31st , 2014, Anbang bought 178,000,000 A-shares in China Merchants Bank with a per-share value of RMB 16.271, increasing its holding to 13.11% and its total amount of A-shares in China Merchants Bank to 2,705,000,000.
DeHeng Comments： Anbang’s recent large transactions not only make people at home and abroad believe that Anbang is planning to become an international financial holding group company, but also will enhance Chinese insurance companies’ image and status at home and abroad.
9. A subsidiary of China Life Insurance (Overseas) Co. Ltd. in Singapore is Approved to Develop Business Abroad
Time: December, 2014
Event Introduction: On Dec. 16th, 2014, China Insurance Regulatory Commission agreed in principle that China Life Insurance (Overseas) Co. Ltd. to set up a life insurance subsidiary in Singapore in the name of “China Life Insurance (Singapore) Co. Ltd” (to be subjected to the name approved by relevant authorities), with a registered capital of USD 100,000,000. This is the first time a Chinese life insurance company establishing subsidiaries abroad, which marks the beginning of Chinese insurance companies to develop business overseas over the past 32 years.
DeHeng Comments: The establishment of China Life Insurance (Singapore) Co. Ltd,, though being long in coming, marks the beginning of Chinese insurance companies to develop business overseas.
10. Bank-insurance is under Strict Supervision, however, Internet Business Develops Rapidly
Time: January – December, 2014
Event Introduction: On Jan. 16th, 2014, China Insurance Regulatory Commission and China Banking Regulatory Commission jointly issued the Circular on Further Standardizing the Commission Insurance Business of Commercial Banks (the “Circular”). The Circular required that the consumers’ interests shall be put into the first place, and insurance companies and commercial banks shall develop commission insurance business according to related laws and regulations: firstly, insurance companies and commercial banks shall sell right products to right person, and further protection measures shall be made for specific groups such as low-income residents and the elderly; secondly, development of risk security products and long-term savings products shall be encouraged; thirdly, it is required to clarify what insurance companies and agencies can do and what cannot do.
On the other hand, insurance internet business developed rapidly. Increasing dramatically, the total income of internet insurance business of Chinese insurance industry for the first three seasons of 2014 has reached RMB 62,200,000,000, which is 195% more than that of the whole year of last year (RMB 31,800,000,000). On “Double 11”of 2014 (i.e. Nov.11, 2014), the amount of freight insurance policies for returning of goods reached RMB 186,000,000, with a premium more than RMB 100,000,000, which has set a new world record for policy volume of the same kind of insurance within one day. In December, 2014, China Insurance Regulatory Commission issued the Comments Sought on the Interim Measures for the Supervision of Internet Insurance Business (Draft for Comment) to govern internet insurance business.
DeHeng Comments: The restraints on bank-insurance channels and the rapid development of internet insurance business on the other hand revealed the changes of marketing channels of insurance business in China.