In May 2019, China’s Banking & Insurance Regulatory Commission (CBIRC) published two formal determinations (Determinations) via its official website. These Determinations demanded that, in respect of certain breaches and within a specified timeframe, two, named, breaching insurance companies (Insurers) (i) undertake certain ‘rectification’ measures; and (ii) hold individual employees accountable. Key elements of the Determinations are:
- In respect of the Insurers’ shareholders (Shareholders), (i) changes to the Shareholders register were neither filed with, nor approved by, relevant regulators; (ii) freezing orders that had been directed at certain Shareholders’ holdings had not been notified to the Insurers; and (iii) no record had been made in the Shareholders register in respect of certain Shareholders’ share pledges.
- In respect of Insurers’ related party transactions (RPT), the Insurers had failed to establish requisite internal ‘RPT Control sub-Committees’. Further, the Insurers had failed to ensure that their respective internal Audit sub-Committees had been clearly designated to monitor and manage RPTs. The Insurers had failed to establish and implement any RPT control measures at all, and information provided by the Insurers in respect of their respective related parties was wholly inadequate and deficient.
- In respect of the Insurers’ Articles of Association (AoA), and the ‘shareholders assembly, board of directors, board of supervisors and management’, the Insurers’ AoAs had failed to comply with CBIRC’s earlier ‘Guidance in Respect of Insurer AoA’ (Guidance). Further, certain statutory positions within the the Insurers (directors, supervisors, senior management) had been filled with personnel who failed to meet CBIRC’s ‘fit & proper’ criteria (Fit & Proper). Some statutory positions had also been left vacant, in breach of CBIRC regulations, for more than one year. Some personnel appointed to the Insurers’ board sub-committees also failed Fit & Proper. The convening of, and record and minute keeping in respect of, the Insurers’ Shareholder meetings and board meetings were wholly deficient and non-compliant. Designation and delegation of the powers and authorisations of the Insurers’ Shareholders and directors were non-compliant.
- In respect of the Insurers’ Internal Audit, the Insurers had failed to undertake audit interviews and checks of departing, and continuing, senior management. There were found to be insufficient numbers of suitably qualified internal auditors employed by the Insurers.
- In respect of the Insurers’ information disclosure obligations, the Insurers had failed to comply with requirements to publish Shareholder resolutions and other material information, leading to ‘information lags’, ‘information vacuums’, and ‘information disappearance’.