On November 17, 2006, the China Insurance Regulatory Commission (“CIRC”) issued the Notice on Strengthening the Information Disclosure Work for the Reinsurance Transactions between Foreign-funded Insurance Companies and Their Associated Companies (Bao Jian Fa [2006] No. 116). The Notice intends to regulate the reinsurance transactions between a foreign-funded insurance company and its associated company by setting forth the requirements of information disclosure as follows: 

Foreign-funded Insurance Company

The foreign-funded insurance company (the “FIE Insurance Company”) as used in the Notice refers to the following types of company or branch that was established and approved to conduct business within the territory of the People’s Republic of China (the “PRC”) according to relevant PRC laws and regulations: i) the joint venture insurance company; ii) the insurance company wholly owned by the foreign investor; and iii) the branch of a foreign insurance company.

The reinsurance transaction between an FIE Insurance Company and its associated company shall be conducted upon approval by the CIRC and in strict compliance with the Provisions on the Administration of Reinsurance Business

 Temporary Reinsurance

Where an FIE Insurance Company engages in temporary reinsurance2 transactions with its associated company, all the individual transactions effective in each quarter shall be reported to the CIRC within 30 days after the closure of the quarter. The report shall include the following items:

i) the process of making inquiry and offer;

ii) the reason for selecting an associated company;

iii) major terms and conditions, such as type of insurance involved, risk statement of the insured subject, reinsurance method, premiums for ceding reinsurance and ceded reinsurance;

iv) statement regarding whether the ceding company bears the same insurance liability as the ceded company does;

v) the insurance value, handling fees, and payment in respect of proportional reinsurance;

vi) all kinds of proportional reinsurance arrangement in connection with nonproportional reinsurance.

Contractual Reinsurance

Where an FIE Insurance Company engages in contractual reinsurance3 transactions with its associated company, all the individual transactions effective in each quarter shall be reported to the CIRC within 3 months after the contract becomes effective. The report shall include the following items:

i) the process of making inquiry and offer;

ii) the reason for selecting an associated company;

iii) major terms and conditions, such as type of insurance involved, and reinsurance method;

iv) handling fees and payment in respect of proportional reinsurance, calculation, and payment for pure benefit handling fees;

v) in terms of proportional reinsurance, if the ceding company bears different liability from the ceded company, the pricing report signed by the responsible actuary or provided by a separate actuarial institution;

vi) in terms of non-proportional reinsurance, the pricing report signed by the responsible actuary or provided by a separate actuarial institution.

 Other Requirements

According the Notice, additional items shall be reported to the CIRC in case of proportional reinsurance, depending on the various accounting methods adopted. In the case that the ceding company sets aside the reserves which is payable by the ceded company, additional items regarding various interest rates shall be reported to CIRC

Within 30 days after the close of each quarter, an FIE Insurance Company shall report to CIRC the Quarterly Statistics Statement (in both hard copy and electronic format) of all the closed quarters in the same year concerning the reinsurance transactions between an FIE Insurance Company and its associated company.

No later than April 30 of each year, an FIE Insurance Company shall report to CIRC the Annual Statistics Statement (in both hard copy and electronic format) of the last two years concerning the reinsurance transactions between an FIE Insurance Company and its associated company.