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(Mar 11, 2009) On February 28, 2009, China's National People's Congress (NPC) Standing Committee approved amendments to the Insurance Law. The revision expands the number of articles in the Law to 187 from 158. The changes will take effect on October 1, 2009. (Authorized Issuance: Insurance Law of the People's Republic of China [in Chinese], XINHUANET, Feb. 28, 2009, available at http://news.xinhuanet.com/legal/2009-02/28/content_10925066.htm.)

Under the amended Law, the China Insurance Regulatory Commission (CIRC) under the State Council (Cabinet) must act to prevent any risky business operations of insurance companies. As the Law stipulates, the CIRC is empowered to order company shareholders "to stop affiliate company transactions that seriously harm the company's interests and undermine its solvency" and to restrict the shareholders' rights should they implement "risky capital operations." (Chinese Lawmakers Approve Insurance Law, CHINA VIEW, Feb. 28, 2009, available at http://news.xinhuanet.com/english/2009-02/28/content_10916287.htm.) Should a company refuse to halt harmful transactions, the CIRC can order it to transfer its shares, but to whom or by what means the transfer is to be made is not specified.

If an insurance company's solvency is inadequate, the CIRC has the authority, under the amended Law, to restrict the salaries of an insurance company's board members and senior administrators, to restrict television commercials or other kinds of advertisement, and to ban the launching new operations. According to Sun Anmin, Deputy Director of the NPC Law Committee, "[t]he new article [139] was added based on proposals from lawmakers in previous discussions. It is a supervision measure to prevent and correct the misuse of shareholders' power." (Id.)

The requirements for establishing an insurance company are also tightened under the revised Law. The principal shareholders must have continuous profit-making capacity, a good credit record, no record of serious violations of the law within the previous three years, and a minimum of RMB200 million (about US$29 million) in net assets (art. 68, item 1). On the other hand, insurance companies' channels of investment have been expanded to include stocks, securities investment funds, and immovable property (art. 106). Formerly, those channels included only government bonds and financial bills.

Author: Wendy Zeldin More by this author
Topic: Insurance More on this topic
Jurisdiction: China More about this jurisdiction

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Last updated: 03/11/2009