Introduction

The opening up of the Chinese insurance market has been accelerated over the past two years. Following the issuance of the Notice of the State Council on Several Measures for Opening Wider to the Outside World and Making Active Use of Foreign Investment on 1 January 2017, the China Banking and Insurance Regulatory Commission (CBIRC) and the former China Insurance Regulatory Commission (CIRC) issued numerous provisions and guidance to further attract foreign investment in the insurance market, including:

  • the CBIRC Notice on Liberalising the Business Scope of Foreign-Invested Insurance Brokerage Companies;
  • the CBIRC Notice on Allowing Overseas Investors to Operate an Insurance Adjuster Business in China; and
  • the CBIRC Notice on Allowing Overseas Investors to Operate an Insurance Agent Business in China.

Recent measures

Following this general trend of expanding the Chinese financial market, in an interview on 1 May 2019 with People's Daily, Xinhua and Economic Daily, CBIRC Chair Shuqing Guo announced the commission's plan to release 12 new measures to further lower the entry threshold for foreign companies that want to invest in the Chinese banking and insurance industries.(1)

Insurance brokerage companies have been a hot target for investors for several years. However, due to the CBIRC's supervision of licensing and the strict requirements which apply in this regard, it has been difficult for investors (particularly foreign investors) to obtain an insurance brokerage licence.

The good news is that – following its liberalisation of the business scope of foreign-invested insurance brokerage companies on 27 April 2018 – in 2019 the CBIRC plans to abolish two of the requirements that foreign insurance brokerage companies must meet in order to conduct business in China (ie, 30 years of business operation history and $200 million of total assets). If this reform takes place, domestic and foreign investors are expected to have equal status when entering the Chinese insurance brokerage market.

The timeline of the threshold for foreign investment in the Chinese insurance brokerage market – from creation to abolition – is set out below.

Timeline of threshold

Title of regulation or guidance

Issue date

Threshold

Notice of the CIRC on Printing and Distributing Insurance-Related Contents of Legal Documents Concerning China's Accession to the World Trade Organisation

12 March 2002

Under this measure, the following rules applied.

Upon accession Foreign insurance brokerage companies could undertake:

  • cross-border brokerage for the insurance of large-scale commercial risks;
  • brokerage for insurance; and
  • brokerage for international marine, aviation and transport insurance and reinsurance.

Foreign insurance brokerage companies could establish joint ventures in Shanghai, Guangzhou, Dalian, Shenzhen and Foshan, with foreign ownership of no more than 50%. The abovementioned companies could undertake brokerage for:

  • the insurance of large-scale commercial risks;
  • reinsurance; and
  • international marine, aviation and transport insurance and reinsurance.

Meanwhile, foreign insurance brokerage companies could provide master policy brokerage services in accordance with the rules which applied to domestic companies.

The issuance of business permits was not subject to economic needs tests or quantitative restrictions. The qualifications for establishing a foreign insurance brokerage institution in China were the same as those for life insurers, except foreign insurance brokerage companies must have total assets worth at least $5 billion at the end of the year prior to application.

Under the establishment conditions, foreign-invested life insurers were required to:

  • be a foreign insurer that had operated for more than 30 years in the territory of a World Trade Organisation member;
  • have had representative offices in China for two consecutive years; and
  • have total assets worth at least $5 billion at the end of the year prior to that in application.

Within one year from accession To apply to establish a company in China, a foreign insurance brokerage company's total assets had to be worth at least $400 million at the end of the year prior to application.

Within two years from accession To apply to establish a company in China, a foreign insurance brokerage company's total assets had to be worth at least $300 million at the end of the year prior to application.

Within three years from accession Within three years from accession, the geographic restrictions were lifted; the foreign equity therein could not exceed 51%.

Within four years from accession To apply to establish a company in China, a foreign insurance brokerage company's total assets had to be worth at least $200 million at the end of the year prior to application.

Within five years from accession A foreign insurance brokerage company could establish wholly foreign-owned subsidiaries in China (no restrictions applied other than the establishment conditions and the business scope restrictions).

Notice of the CBIRC on Liberalising the Business Scope of Foreign-Invested Insurance Brokerage Companies

27 April 2018

This measure liberalised the business scope of foreign-invested insurance brokerage companies by removing the differences between foreign-invested and domestic-invested brokerage companies. As such, foreign-invested insurance brokerage companies were permitted to engage in the following types of insurance brokerage business in China:

  • the development of insurance application plans, the selection of insurers and the handling of insurance application procedures for insurance applicants;
  • the provision of assistance to insureds or beneficiaries with regard to making claims;
  • reinsurance brokerage business;
  • the provision of disaster or loss prevention or risk assessment and management consulting services; and
  • other business approved by the CBIRC.

CBIRC Accelerates the Implementation of Opening-Up Measures in the Banking and Insurance Industries (CBIRC official news article)(2)

27 April 2018

This measure abolished the requirement for foreign brokerage companies to have had a representative office for at least two years before establishing a foreign-invested insurance institution.

Notably, CBIRC regulations are inconsistent with regard to whether 'insurance institutions' include insurance intermediary institutions. Thus, this definition is still subject to further explanation from the CBIRC.

GUO Shuqing Accepted the Interview on Expanding Opening-Up in the Banking and Insurance Industries (CBIRC official news article)

1 May 2019

This measure abolished the requirement for foreign brokerage companies to have operated for at least 30 years and have total assets worth $200 million before undertaking insurance brokerage business in China.

Comment

At present, only a few foreign-invested insurance brokerage companies (ie, companies with at least 25% foreign ownership) operate in China. According to official statistics, the Chinese insurance market has only six foreign-invested insurance brokerage companies, including:

  • Marsh China (wholly foreign owned);
  • Guy Carpenter Beijing (wholly foreign owned);
  • Willis Shanghai (90% foreign owned);
  • Aon-COFCO (50% foreign owned).(3)

The foreign shareholders of these companies are all well-known insurance brokerage companies which have a long history in the industry. According to the CBIRC, the purpose of abolishing the requirement to have a 30-year business operation history and total assets worth at least $200 million is to encourage comparatively young but high-quality and competitive foreign insurance brokerage companies to enter the market and deepen the communication and cooperation between Chinese companies with advanced foreign brokers.

As a next step, the CBIRC will revise the current regulations to put the opening measures into place. Following these developments, an increasing number of foreign investors are expected to apply for Chinese insurance brokerage licences.

Endnotes

(1) CBIRC General Office, "GUO Shuqing Accepted the Interview on Expanding Opening-Up in the Banking and Insurance Industries", 1 May 2019.

(2) CBIRC General Office, "CBIRC Accelerates the Implementation of Opening-Up Measures in the Banking and Insurance Industries", 27 April 2018.

(3) Xinhua News Agency LI Yanxia, "CBIRC Press Spokesman XIAO Yuanqi Explains the New Opening-up Measures in the Banking and Insurance Industries", 2 May 2019.

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