In December 2015 the Hubei Administration for Industry and Commerce (AIC) disclosed the penalties that it had issued on 12 insurers for concluding an illegal co-insurance agreement.(1) In particular, the antitrust agency found a co-insurance agreement for construction project personal accident insurance to violate the Anti-monopoly Law prohibition against monopolistic agreements. The insurers were fined Rmb4.69 million in total.

Terms of co-insurance agreement

The disclosed penalty decision notes that the Hubei branch of China Pacific Life Insurance (the chief insurer), 11 other insurers and Wuhan Construction Safety Technology Consultation Centre (WCSTCC) signed a co-insurance agreement on construction project personal accident insurance which included the following terms:

  • The chief insurer and 11 other companies, as co-insurers, jointly took charge of the personal accident insurance for a construction project directly administered by the Wuhan government. WCSTCC was responsible for providing safety, professional and technology services regarding the relevant personal accident insurance.
  • The chief insurer provided 12% of the total amount of the insurance, while the other 11 insurers each provided 8%.
  • The chief insurer, as the representative of the co-insurance agreement, was in charge of collecting the premium and signing the standard form insurance policies. It also issued the invoice in its own name and shared the charged premium with the other companies in accordance with the agreement.
  • Both the chief insurer and the other insurers paid 25% of the received premium to WCSTCC as a service fee. WCSTCC assisted the co-insurers in providing safety and technology management services to the insured. In addition, the 11 other insurers paid 5% of their premiums to the chief insurer as a management fee.
  • If an accident were to arise, the 12 companies would jointly bear the damages based on their respective shares in the co-insurance agreement.
  • A contact mechanism was established whereby the co-insurers regularly held co-insurance conferences to discuss existing problems.

The co-insurers and WCSTCC also signed a self-discipline agreement and established a complete management system to ensure implementation of the co-insurance agreement. Any party violating the co-insurance agreement would be subject to punishment.

Hubei AIC assessment

The Hubei AIC found that WCSTCC was solely invested by Wuhan Construction Safety Management Association, which was under the Wuhan Construction Commission. The WCSTCC helped to implement certain functions of the Wuhan Urban Construction Safety Management Station and was responsible for quality and safety supervision of municipal construction projects.

It later became a prerequisite for construction companies to purchase insurance from any member of the co-insurance agreement in order to obtain approval to commence their project. According to the decision, the Hubei AIC launched another separate investigation of the WCSTCC.

The Hubei AIC concluded that the co-insurance agreement constituted a monopolistic agreement prohibited under Article 13(2) of the Anti-monopoly Law. In its assessment, the Hubei AIC first noted that co-insurance – as a common business model to share and lower risks – was widely adopted in the insurance industry; in theory, a co-insurance arrangement concluded for a specific project in order to keep a single insurer from facing unreasonably high risks can be legal. However, co-insurance should not target the entire market. In this case, the risks of the construction projects were unpredictable before the co-insurance agreement was concluded, since the scale of the projects, the difficulty of construction and the number of construction workers needed were unknown at that time. As it was impossible to predict the risks of the projects, it was unnecessary to cooperate with other insurers to collectively bear the risks. The Hubei AIC held that the true purpose of the co-insurance agreement was to avoid competition among the 12 insurers, which constituted a monopolistic agreement prohibited by the Anti-monopoly Law.

The Hubei AIC further held that by entering into the co-insurance agreement, the insurers actually divided the relevant market of construction project personal accident insurance in Wuhan city, which adversely affected both market competition and the interests of other competitors and consumers. In particular, the Chinese Construction Law (as amended in 2011) stipulates that the purchase of personal accident insurance is not mandatory and that construction companies may freely choose whether to buy said insurance. Purchasing insurance from one of the insurers party to the co-insurance agreement had been a prerequisite for construction companies seeking administrative approval for a project, which seriously distorted fair competition in the market.


Citing Article 46(3) of the Anti-monopoly Law, the 12 insurers were collectively fined Rmb4.69 million, including fines on the companies and confiscation of illegal gains. Notably, the fines were calculated based on the companies' 2014 annual sales of insurance products in connection with the co-insurance agreement. The chief insurer incurred a fine amounting to 6% of its relevant 2014 annual sales, while the other insurers incurred fines amounting to 2% of relevant sales (for further details please see the table below).

Click here to view table.


Co-insurance, as an effective means of lowering risks, is widely used in the insurance industry. Information sharing and agreements on co-insurance are generally considered efficient and legitimate. However, co-insurance agreements may raise competition concerns, depending on the circumstances of each agreement. Where there is enough capacity for one insurer to cover the potential risks, the antitrust authorities may consider the co-insurance agreement to constitute a horizontal monopolistic agreement.

For further information on this topic please contact Hao Zhan or Ying Song at AnJie Law Firm by telephone (+86 10 8567 5988) or email ( or The AnJie Law Firm website can be accessed at


(1) The original notice published by the State Administration for Industry and Commerce is available (in Chinese) at

(2) Article 13 states:

"Competing undertakings are prohibited from concluding the following monopoly agreements:

1) on fixing or changing commodity prices;

2) on restricting the amount of commodities manufactured or marketed;

3) on splitting the sales market or the purchasing market for raw and semi-finished materials;

3) on restricting the purchase of new technologies or equipment, or the development of new technologies or products;

4) on joint boycotting of transactions;and

5) other monopoly agreements confirmed as such by the authority for enforcement of the Anti-monopoly Law under the State Council.

For the purposes of this Law, monopoly agreements include agreements, decisions and other concerted conducts designed to eliminate or restrict competition."

(3) Article 46 states:

"In the case where an Operator violates the provisions of this Law by entering into and implementing a monopoly agreement, the anti-monopoly law enforcement authorities shall order a halt to illegal activities, confiscate illegal earnings, and impose a fine of between of between 1 and 10 percent of the previous year's sales volume; if the monopoly agreement had been entered into but not yet been implemented, a fine no more than [Rmb]500,000 shall be imposed.

Where an Operator reports, on its own initiative, a monopoly agreement entered into by said Operator to the anti-monopoly law enforcement authorities as well as providing key evidence, the anti-monopoly law enforcement authorities may consider a lighter fine, or forgo a fine altogether.

In the case where an industry association violates the provisions of this Law by making arrangements for the Operators within its industry to enter into monopoly agreements, the anti-monopoly law enforcement authorities my impose a fine of no more than [Rmb]500,000; if the case is serious, the administrative authorities in charge of the registration of non-governmental organisations may revoke the registration of said industry association."

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