State Council's vision on bringing China's insurance
industry into the modern age
Earlier this year the State Council of the People's Republic
of China promulgated its Several Opinions on Accelerating the
Development of Modern Insurance Industry.
The overall aim of the opinions is for the Chinese insurance
market to keep pace with the modern developed insurance market. The
opinions contain 10 main clauses each further divided into
sub-clauses, covering various issues from strategies of the
insurance and reinsurance industry, insurance intermediary services
and plans for an insurance credit system and data system, to key
insurance areas to develop such as medical, elder care, liability,
catastrophe and agriculture insurance.
The key points of the opinions are:
commercial insurance should become "an important pillar of
the social security system". Commercial insurance will
gradually become the main provider of the security plans for
individuals, families and for enterprises that intend to launch
elder care or medical insurance schemes;
the importance of developing various health insurance products,
including medical, illness, and health-related income loss
insurance, and to connect these commercial medical insurance
products with basic medical service provision under the social
security system. Insurance companies are also encouraged to provide
health management services and even to invest in or set up medical
institutions to combine the insurance and medical industries;
elder care insurance is also mentioned, which reflects the
concerns of the Chinese government over the growing ageing
population in China. The Opinions encourage insurance companies to
develop elder person bank deposit insurance products and elder
person household reverse mortgage insurance products. Insurance
companies are encouraged to invest in the elder care services
industry. In addition, the Opinions also provide that local
governments should commit a sufficient provision of land for elder
care and medical usage;
China is also exploring a catastrophe and accident system. The
aim is to gradually establish cat funds and a cat reinsurance
mechanism with the ultimate goal of putting a multi-layer cat risk
undertaking system in place. Local insurers are encouraged to
develop an effective coverage for risks arising from natural
disasters such as typhoon, earthquake, landslides, mudslides,
flood, and forest fire. Promulgation legislation regarding cat is
also listed in the government's agenda;
the Opinions mention the State Council encourages the
development of the reinsurance market and regional reinsurance
centres, as well as the increase of reinsurance market players
(which might be of interest for those overseas reinsurers that do
not have a presence in China). It also mentions that reinsurance
should provide protections for large risks and special risks
arising from agriculture, transportation, energy, aviation, nuclear
and other major projects of the state, as well as providing
coverage for Chinese overseas entities; and
insurance fund usage is also covered. Insurance funds are now
encouraged to invest in enterprise equity, bonds, securities
investment funds and asset plans, and also to support large
infrastructure projects and property developments by way of equity
or bond investment plans. Insurance funds may also be invested in
technical enterprises and new booming industries.
The opinions have provided direction for the Chinese insurance
industry going forward. They may also affect insurance market
players both inside and outside China.
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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