China: Investing In Insurance Broking Business In China

Last Updated: 12 April 2011
Article by Carrie Yang and David Coupe

Market overview

According to the latest statistics from the China Insurance Regulatory Commission ("CIRC"), at the end of 2010, there are 392 insurance brokers companies in China.

Brokers handled premiums of RMB31.31bn in 2010, giving them a 2.13% share of the total premium income of the Chinese insurance market. Brokers handled premiums for non-life sector are RMB26.16bn amounting to 6.71% of market share and RMB4.30bn for life sector representing 0.41% of the total life market. The brokers handled premiums for reinsurance sector in 2010 are RMB0.85bn.

The following table shows the market shares of the top 10 brokers in 2010:

Foreign-invested brokers

There are around 10 foreign-invested insurance brokers in China and their market share is about 15%. The largest 3 foreign-invested insurance brokers in China are AON-COFCO, Willis and Marsh. Their market share is about 90% of the 15% indicated above.

AON-COFCO is the first foreign-invested broker in China, which was established in 2003 by AON and China National Cereals, Oil & Foodstuffs Corp ("COFCO"). The shareholding ratio between AON and COFCO is 50:50. Willis is in co-operation with Pudong Insurance Brokers Co Ltd. Willis increased its equity ratio in the joint venture to 51% in 2005 and it is now the majority shareholder of the joint venture.

Since 11 December 2006, foreign brokers have been allowed to own 100% equity interest in an insurance broking company in China (i.e. a Chinese partner is no longer required). Marsh is the first 100% foreign owned insurance broker in China, which was incorporated in 2007 in Beijing. There are also some other wholly foreign owned insurance brokers such as Lockton (which obtained CIRC approval in 2008) and Guy Carpenter (which obtained its licence from CIRC recently in December 2010.)

Market Entry Requirements

A foreign broker is required to have a corporate presence in the form of a foreign-invested insurance broking company in order to carry on insurance broking business in China. Otherwise, it will be deemed by the CIRC as carrying on business without a licence and will expose the foreign broker concerned to various administrative penalties.

A foreign-invested insurance broking company can adopt either of the following two corporate structures:

  1. establishing a wholly foreign owned enterprise ("WFOE");
  2. entering into a joint venture with a Chinese partner ("JV").

Any JV structure involves having one or more Chinese shareholders. This is unlike the WFOE corporate structure where the foreign broker remains the only shareholder. The main advantage to have a JV is that the foreign broker could enjoy the business network of the Chinese partner. However, there are also disadvantages of a JV structures such as that it is often difficult to find a suitable and willing Chinese partner with compatible management style and business model in place structure and the negotiations with prospective Chinese partners could be very time-consuming and protracted.

In practice, whether to adopt a corporate structure of JV or WFOE will largely depend on the strategy of the foreign broker. As indicted above, AON and Willis adopted JV as their initial corporate structure when entering the Chinese insurance market while Marsh adopted a 100% owned subsidiary in China.

The process

It is a statutory requirement that any foreign broker wishing to set up a foreign-invested insurance broking company in China must first have established its Representative Office ("RO") in China for at least two years. A foreign broker would usually go through the following 2-stage process (in sequence) before it can obtain an insurance broker licence from the CIRC:

  1. set up a RO;
  2. b) set up a JV or WFOE.

RO

a) Requirements

A foreign broker which satisfies the following requirements can apply to establish a RO in China:

  1. good business performance;
  2. having been engaged in insurance business for at least 20 years;
  3. no record of any major violation of laws and regulations within three years prior to the application date;
  4. the investor's total assets as at the year end prior to the application shall be no less than US$200 million; and
  5. other requirements stipulated by CIRC.

b) Operating funds

Since a RO is only entitled to carry out liaison and coordination activities / market research but not undertake business or income generating activities, there is no operating funds / registered capital requirement.

JV or WFOE

a) Requirements In accordance with China's commitment upon its accession to WTO on 11 December 2001, a foreign broker which satisfies the following requirements can apply to establish a JV or WFOE in China:

  1. it must have been engaged in insurance business for more than 30 years;
  2. a RO has been established in China for more than 2 years;
  3. its total assets as at the year end prior to the application shall be no less than US$200 million;
  4. the country where it is situated must have a sound system for the regulation of insurance business and it must already be under the effective supervision of the relevant authority in the country concerned;
  5. it must obtain the approval of the relevant authorities in its country of incorporation for the establishment of proposed JV or WFOE in China; and (vi) it must satisfy other requirements stipulated by CIRC.

b) Paid-up capital

The minimum paid-up capital of an insurance broking company in China is RMB10 million (equivalent of approx £1 million), which must be injected by shareholder(s) of the insurance broking company in cash.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions