On 26 June 2012, China Insurance Regulatory Commission ("CIRC") released the Notice on Further Regulation of Market Entry of Insurance Intermediaries ("Notice").
The CIRC states in the Notice that no new licence for insurance intermediaries will be granted unless the applicant applies to establish the following insurance intermediaries:
- insurance intermediary group
- insurance agency/broker with a registered capital of RMB50 million or above which are invested by car manufacture/sales/repair enterprises, banks, China Post offices or insurance companies, and branch offices of the aforesaid insurance agency/broker, and
- branch offices of an existing insurance agency operating on a nationwide basis/broker
This is the second circular issued by the CIRC this year in relation to regulation of market entry into the insurance intermediary market. Back in March 2012, the CIRC suspended granting new licences to full-time insurance agencies, and their branch offices, operating on a regional basis. The licence for part-time insurance agency business has also said only to be granted to financial institutions and China Post offices.
Under Chinese law, there are three types of insurance intermediaries: insurance agencies, insurance brokers and insurance loss adjusters. With issuance of the two circulars by the CIRC this year, it is apparent that no new licence for insurance loss adjusters will be granted as well. To establish an insurance agency/ broker, the minimum threshold requirement on paid-up capital has been considerably increased to RMB50 million. The minimum paid-up capital previously required under the CIRC's regulation was RMB two million for insurance agencies and loss adjusters and RMB 10 million for insurance brokers.
The Notice nevertheless clearly indicates that for those applications which had already been accepted by the CIRC prior to the issuance of the Notice, they will not be affected and will be handled according to the existing rules and procedures.
It is clear that the CIRC continues to encourage establishment of insurance intermediary groups as well as insurance agencies/brokers with strong financial capacity. The CIRC aims to transform the Chinese insurance intermediary market and the Provisions on Supervision of Full-time Insurance Agencies, the Provisions on Supervision of Insurance Brokers and the Provisions on Supervision of Insurance Loss Adjustors will be further amended.
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