Zhan Hao Wan Jia Chen Jun Yu Dan February 21 2023 Chinese insurance law practice overview: 2023 AnJie Broad Law Firm | Insurance - China Zhan Hao, Wan Jia, Chen Jun, Yu Dan Insurance IntroductionLaunch of personal pension systemDevelopment of green insuranceContinued popularity of D&O liability insuranceCommentIntroductionOver the past decade, China's insurance industry has grown rapidly and has continued to hold the second-largest premium market share worldwide for many years, contributing steadily to the global insurance market. In 2022, despite the repeated impact of the pandemic and the turbulent capital markets, China's insurance industry was put to the test and has since seen new developments with the introduction of various favourable policies, such as:the start of pension insurance;green insurance; andthe continued popularity of directors' and officers' (D&O) liability insurance.Based on data released by the China Banking and Insurance Regulatory Commission (CBIRC) on its official website on 11 January 2023, as of November 2022:the insurance companies' original insurance premium income reached $635 billion, which represents an increase of 4.95% year on year;the claims and benefits paid out were $192 billion, which represents a decrease of 0.60% year-on-year;the total assets of the insurance industry reached $3.9 trillion; andthe net assets of the insurance industry reached $398 billion.Launch of personal pension systemAs China's population continues to age, new countermeasures to address the issue of elderly support are being introduced. In 2022, China's personal pension system was developed. In April 2022, the General Office of the State Council released the Opinions on Promoting the Development of Personal Pensions, announcing for the first time a complete institutional framework. Subsequently, the State Administration of Taxation, the CBIRC and other government agencies have issued supporting pilot rules to aid the personal pension system from the perspective of personal tax incentives and pension insurance products.For example, the CBIRC issued the Notice on the Launch of Pilot Commercial Pension Business of Pension Insurance Companies in December 2022, allowing four pension insurance companies to launch pilot businesses in 10 provinces, including Beijing, where pension insurance companies can provide one-stop services to their clients, such as:account management;pension planning;fund management; andrisk management.In the meantime, the insurance industry has an inherent advantage in the personal pension track. Insurance funds are large scale, long term and stable. Insurance companies usually manage the incremental funds generated by pension products through their asset management subsidiaries. The insurance asset management companies can overcome market volatility to a certain extent and achieve investment returns in terms of liability-side demand and absolute returns, which are compatible with the features of long-term funds such as pensions. Therefore, insurance asset management products are an indispensable support for improving the personal pension financial system.Development of green insuranceIn 2022, the CBIRC issued the Guidelines on Green Finance for the Banking and Insurance Industry and the Notice on the Statistical System of Green Insurance Business, defining "green insurance" for the first time at the institutional level. The guidelines require the insurance institutions to focus on environmental, social and governance (ESG) risks in the areas of:organisational management;system building;internal control management; andinformation disclosure.Moreover, insurance institutions should use the results of ESG assessments as an important basis for cost management and investment decisions and apply differential rates according to the risk profiles of their clients.While green insurance in China is still in the primary stage of development, along with the implementation of China's concept of "green development" and the "double carbon" target, green insurance will have a unique opportunity for growth.Continued popularity of D&O liability insuranceIn the past three years, D&O liability insurance in the A-share market continues to be popular. According to a China Securities Journal reporter, a total of 337 A-share listed companies announced the purchase of D&O liability insurance in 2022, and the number of insured companies rose 36% year on year.The high increase in the insured rate is partly due to the representative litigation system created by the revised Securities Law, which opened the door to A-share securities class actions and significantly increased the litigation risk for A-share listed companies and their directors and officers. The judicial practice of class action litigations such as the Kangmei Pharmaceuticals case, Luckin Coffee case, the Feilo Acoustics case and the Huifeng Joint Stock case, has taken the liability risks of directors and officers to reality.Regulatory authorities continue to increase their efforts to investigate and punish information disclosure irregularities. In the first 11 months of 2022, the China Securities Regulatory Commission investigated 56 listed companies for alleged information disclosure violations, 65% more than the same period in 2021. Furthermore, the revised Securities Law also strengthens the regulatory constraints on the "controlling minority" by expanding the scope of people who have disclosure obligations and strengthening directors' and officers' disclosure obligations. There has been a steep increase in civil litigation cases involving misrepresentation or illegal information disclosure, and there is a positive correlation between litigation risk and demand for D&O liability insurance.In addition, the number of A-share D&O liability insurance claims and potential claims increased noticeably in 2022. Given that D&O liability insurance claims take a long time, it is expected that more potential claims may be converted into actual claims in 2023. With the rise in litigation risk faced by listed companies and the increase in D&O liability insurance claims, the increase in D&O liability insurance premiums is an inevitable trend.In the meantime, due to the covid-19 pandemic and geopolitical turmoil, the Chinese insurance market has also felt unprecedented pressure during the past year, and those factors have brought more insurance disputes in sectors such as:business interruption insurance;credit and warranty insurance;profession liability insurance; andco-insurance and reinsurance.CommentThe Chinese insurance market and regulation are undergoing tremendous changes. With the loosening of China's epidemic prevention policy and the recovery of the national economy at the end of 2022, it is anticipated that China's insurance and legal service market will face more opportunities and challenges in 2023.For further information on this topic please contact Hao Zhan, Jia Wan, Jun Chen or Dan Yu at AnJie Broad Law Firm by telephone (+86 10 8567 5988) or email ([email protected], [email protected], [email protected], or yudan[email protected]). The AnJie Broad Law Firm website can be accessed at www.anjielaw.com.