On March 26, 2012, the China Insurance Regulatory Commission (CIRC) issued the Notice regarding Suspension of Market Entry Approval of Regional Insurance Agencies and Certain Part-time Insurance Agencies (Notice). Pursuant to the Notice, CIRC will suspend the granting of new licenses to professional insurance agencies operating on a regional basis and to new branch offices of existing regional agencies. In addition, CIRC will suspend granting new licenses to part-time insurance agencies (including travel agencies), unless the applicant is a financial institution or a China post office.

The Notice is believed to be part of CIRC’s effort to tighten supervision over the insurance agency market by squeezing small-scale and unqualified agencies out of the market. Under the current legal regime, insurance agencies in China are categorized as professional agencies that specialize in insurance brokerage business and part-time agencies that conduct insurance brokerage business as a non-core business.  Professional agencies are further divided into those operating on a national level and those operating on a regional level. Currently, there are around 2,000 professional agencies and more than 190,000 part-time agencies. Maintaining effective supervision over such a large number of agencies in a new and evolving market is a huge challenge for CIRC. Among other things, on March 27, 2012 CIRC disclosed that many regional insurance agencies do not meet statutory capital requirements.  Agency licenses are renewed every three years and going forward it is likely that CIRC will closely review license renewal applications by existing insurance agencies with a view to reducing the number of regional agencies and part-time agencies.