On 26 March 2012, China Insurance Regulatory Commission
("CIRC") issued the Notice on Suspension of Market
Entry Approval of Regional Insurance Agencies and Certain Part-time
Insurance Agencies ("Notice").
Pursuant to the Notice, the CIRC and its local offices will
suspend granting new licences to full-time insurance agencies
operating on a regional basis ("Regional Insurance
Agencies") as well as to branch offices of existing
Regional Insurance Agencies. In addition, no new licences for
part-time insurance agency businesses will be granted unless the
respective applicant is a financial institution or a China Post
The CIRC emphasised in the Notice that its local offices shall
continue to support the establishment of insurance intermediary
groups and full-time insurance agencies operating on a nationwide
basis, as well as continue to support their respective branch
Under the Provisions on Supervision of Full-time Insurance
Agencies (which came into force on 1 October 2009), the
paid-up capital threshold for a full-time insurance agency is RMB 2
million. However, the CIRC indicated that the majority of the
Regional Insurance Agencies in the market do not meet the above
mentioned minimum paid-up capital requirement. Most of the Regional
Insurance Agencies only engage in the auto insurance business. The
CIRC had previously required full-time insurance agencies
established prior to 1 October 2009 to increase their paid-up
capital to meet the minimum statutory requirement (i.e. RMB 2
million). If they failed to do so, their operational licences could
only be extended until 1 October 2012.
On the other hand, there are currently more than 190,000
part-time insurance agencies in China. Amongst those part-time
insurance agencies, more than 130,000 are local offices of banks
and the China Post Office. The other 50,000 part-time insurance
agencies are mainly involved in the auto insurance business.
It appears that the CIRC is aiming to increase the entry
thresholds of Regional Insurance Agencies and part-time insurance
agencies with a view to reducing the number, as well as, enhancing
the quality of insurance agencies in the market. Officials of the
CIRC indicated that the suspension of the approval is merely a
transitional measure and the CIRC intends to further amend the
Provisions on Supervision of Full-time Insurance Agencies
to set higher market entry requirements. It has also been indicated
that the CIRC may also consider removing Regional Insurance
Agencies as a type of insurance agency in the future.
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.
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Contractors and principals should ensure they have appropriate insurance coverage instead of relying on indemnity clauses.
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