The China Insurance Regulatory Commission (CIRC) recently promulgated the Administrative Measures on Classification of Business Scope of Insurance Companies (“Administrative Measures”), which came into force on 2 May 2013. The Administrative Measures provide for new rules in relation to market entry thresholds. The CIRC also starts to regulate insurers in the market by categorising different insurance business.

Categories of Insurance Business

Under the PRC Insurance Law, insurance business is generally categorised into property and casualty (“P&C”) insurance and personal insurance. The Administrative Measures have further categorised insurance business into basic category (“Basic Business”) and expanded category (“Expanded Business”), details of which are set out in the tables below.

Click here to see tables.

Please note that the above categories of business only apply to direct insurance business. Reinsurance business, utilisation of insurance funds and sales of other insurers’ products under an agency relationship are not subject to the Administrative Measures.

New Requirements

New market entrants are only allowed to engage in Basic Business. The tables below set out the capital requirements for a new insurer who wants to apply for carrying on a single or multiple types of Basic Business.

Click here to see tables.

The CIRC also imposes the following general requirements for insurers to apply for carrying on the Expanded Business: -

  1. the applicant must already have an operational licence covering the Basic Business (i) to (iii);
  2. separate application needs to be submitted for each type of the Expanded Business; and
  3. the interval of two applications must not be less than six months.

In addition, there are also additional requirements on trading history, net assets, solvency etc for application for each type of the Expanded Business, which need to be met by the applicant.

According to the CIRC, it intends to introduce a reasonable classification of insurance business and to encourage insurance companies to develop business which provide basic coverage. Since the solvency of an insurer will be taken into consideration by the CIRC when the insurer applies for any Expanded Business, the Administrative Measures will hopefully help insurance companies improve its capital management and risk control.