The CIRC (China Insurance Regulatory Commission) has issued a draft “Administrative Rules for Shares in Insurance Companies” and has asked for comments from the public. The draft rules deal with the purchase, increase and decrease, transfer, and pledge of shares in the domestic insurance companies.
The rules only cover domestic insurance companies whose foreign investment is lower than 25 per cent of the total shares. A single investor, whether domestic or foreign, is not permitted to hold more than 20 per cent of the total shares of an insurance company, unless approved otherwise by the CIRC. However, under the current regime, a single foreign investor cannot hold more than 5 per cent of the capital of an insurance company.
Insurance companies whose foreign investment exceeds 25 per cent of its total shares will be considered as a foreign invested insurance company and different regulations will be applied.
Only foreign financial institutions are permitted to invest in Chinese insurance companies. However, the provision which forbade foreign insurers with operations in China from taking a stake in domestic companies has been removed.
Foreign financial institutions who wish to invest in Chinese insurance companies must meet a number of criteria established in the draft rules. This is the first time that clear standards have been established.