On 22 March 2011, the China Insurance Regulatory Commission (CIRC) published a set of draft Tentative Administrative Measures on the Transfer of Insurance Business (Draft Measures) for public consultation by 11 April 2011.
At present, transfers of insurance business may be effected under the China Insurance Law in the event of insurer insolvency or if the insurer fails to meet the prescribed solvency requirements. The Draft Measures are not applicable in these circumstances. They aim to provide a mechanism for transfers of insurance business in the ordinary course of business.
The Draft Measures consist of twenty-one sections. In essence, they require that all transfers of insurance business (both life and general and whether in whole or in part) be approved by the CIRC. They also stipulate that the transferee shall assume all the obligations and liabilities of the transferor with respect to the policyholders, the insureds and the beneficiaries under the original insurance contracts.
The Draft Measures also set out the conditions and qualification requirements of a transferee and the documents required to be submitted to the CIRC for approval. In particular, the transferee is required to have a branch office at each location where the insurance policies proposed to be transferred were originally issued. The Draft Measures also require the transferor to obtain the consent of policyholders and insureds to the proposed transfer after the CIRC has approved a proposed transfer agreement. It is not clear how the failure to obtain such consent may affect the proposed transfer taking effect.
This is the first set of regulatory requirements released by the CIRC in relation to the transfer of insurance business. Despite its over-simplicity and lack of detailed implementation measures, the Draft Measures are intended to assist in the consolidation of the insurance market but may have the effect of squeezing smaller players out.