CIRC issues measures on indirect supervision of
insurers' non-insurance subsidiaries
On September 28, 2014, the China Insurance Regulatory Commission
(CIRC) formally issued the Interim Administrative Measures on
the Non-insurance Subsidiaries of Insurance Companies (the
Interim Measures), which took immediate effect. We reported on this
topic when the CIRC issued the draft of the Interim Measures for
public consultation in May this year (For details, please refer to
Asia Pacific – focus on insurance August 2014).
The Interim Measures contain most of the provisions set forth in
the draft version, however, there are some key differences which
can be summarised as follows:
Permitted investments: Investment in call
centres is removed from the Interim Measures. This, to some extent,
complies with the current regime that a non-life insurer must carry
on telemarketing business itself, while a life insurer can conduct
telemarketing business either itself or through qualified insurance
intermediaries (which are obviously not non-insurance
Investment restrictions: Different from its
draft version, the Interim Measures lift the prohibition on an
insurer's subscription for bonds issued by a non-insurance
subsidiary. Also, subject to proper internal or external approval,
an insurer is permitted to make commitments to increase investments
in or provide assistance to a non-insurance subsidiary as
More stringent solvency requirement: The
Interim Measures increase the solvency requirement from 120 to 150
per cent for an insurer to invest directly in a non-insurance
subsidiary which engages in service sharing business.
CIRC permits insurance funds to invest in preferred shares
CIRC issued the Notice on Relevant Matters concerning the
Investments in the Preferred Shares by Insurance Funds
(Notice) on October 17, which took immediate effect. The Notice
allows the investments of insurance funds, directly or through
qualified assets managers, in preferred shares. Preferred shares,
publicly issued or not, refer to types of shares (other than
ordinary shares), whose holders may enjoy preferential rights in
allocation of profits and residual assets but may be restricted
from participating in decision-making rights. The Notice includes
the following key points:
preferred shares invested in must have a long-term credit
rating equal to A or above, rated by a credit rating institution
recognised by CIRC;
investment in preferred shares is subject to an investment
ratio requirement which is based on the classification of the
preferred shares as equity assets or fixed-income assets by the
issuers of such preferred shares;
an internal credit assessment mechanism shall be established
for insurance funds' investment in the preferred shares;
investment in the preferred shares is subject to internal
approval (e.g. approval of board or board authorised organs) and
post-reporting to the CIRC.
By way of background, the preferred shares scheme was formally
launched in China late last year. In practice the authorities have
maintained a conservative attitude towards the scheme and,
consequently, only a limited number of entities have been approved
to offer preferred shares on a trial basis.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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