On 30 May 2018, the China Banking & Insurance Regulatory Commission (CBIRC) issued for public review and feedback both the:
- Recommended Draft of Decisions Relating to Amending Regulations Governing Foreign Invested Insurers in China (Decisions); and
- Consultation Draft Implementing Measures for Regulations Governing Foreign Invested Insurers in China (Draft).
Key elements contained in the Decisions and Draft are:
- The Decisions repeal the existing requirement contained in Regulations Governing Foreign Invested Insurers in China (FII) which requires foreign insurers, prior to investment into an FII in China, to have maintained a CBIRC-approved insurance representative office for two years.
- The Draft allows foreign investors in Life FIIs in China to hold up to 51% of shares in such Life FIIs, up from the existing 50% cap.
- The Draft defines and newly regulates “Pre-Eminent Shareholders”of FIIs:
1) An FII shareholder is a Pre-Eminent Shareholder if it satisfies any one of the following three tests, either (i) holding greater than 50% shareholding; or (ii) being the single largest shareholder; or (iii) holding less than 50% shareholding, but being able to exercise ‘material & substantial’ influence over the FIIs operations and management.
2) At least one Pre-Eminent Shareholder of an FII must be a compliant and currently operating insurance company.
3) A Pre-Eminent Shareholder’s shares in an FII are ‘locked-up’ for a five-year period commencing on the date of acquisition of such shares, excepting (i) CBIRC approval otherwise; or (ii) legally-mandated and unavoidable divestment; or (iii) intra-group corporate re-organisations with no direct or indirect change of control.
4) Prior to a Pre-Eminent Shareholder either divesting its FII shareholding or otherwise quitting the China market, it must first (i) meet all its obligations to the FII as a shareholder; (ii) make all capital contributions to the FII as may be required; (iii) ensure that the FII’s solvency position meets all regulatory requirements.