Insurance Law of the People’s Republic of China

(Adopted at the 14th Meeting of the Standing Committee of the
Eighth National People’s Congress on June 30, 1995, promulgated by
Order No. 51 of the President of the People’s Republic of China,
and amended in accordance with the Decision on Amending the
Insurance Law of the People’s Republic of China adopted at the 30th
Meeting of the Standing Committee of the Ninth National People’s
Congress on October 28, 2002)

Contents

Chapter I       General
Provisions

Chapter II      Insurance
Contracts

Section 1 General
Provisions

Section 2 Contract of Property
Insurance

Section 3 Contract of
Insurance of the Person

Chapter III   Insurance Company

Chapter IV   Rules Governing Insurance
Business

Chapter
V             
Supervision and Control of the Insurance Industry

Chapter VI   Insurance Agents and
Brokers

Chapter VII   Legal Liabilities

Chapter VIII   Supplementary
Provisions

Chapter I

General Provisions

Article 1 This Law is enacted for the purpose of regulating
insurance activities, protecting the legitimate rights and
interests of the parties involved, strengthening supervision and
control of the insurance industry and promoting its healthy
development.

Article 2 The term of the “insurance” as used in this Law
refers to a commercial insurance transaction whereby an insurance
applicant, as contracted, pays insurance premiums to the insurer,
and the insurer bears an obligation to indemnify him for property
loss or damage caused by the happening of a contingent event that
is agreed upon in the contract, or to pay the insurance benefits
when the insured person dies, is injured or disabled, suffers
illness or reaches the age or time-limit agreed upon in the
contract.

Article 3 Insurance activities conducted within the
territory of the People’s Republic of China shall be governed by
this Law.

Article 4 Insurance activities shall be conducted in
compliance with laws and administrative rules and regulations, with
respect for public morality and on the principle of voluntary
participation.

Article 5 In exercising their rights and performing their
obligations, the parties to insurance activities shall follow the
principle of good faith.

Article 6 Commercial insurance business must be conducted
by insurance companies established in accordance with this Law; and
no other entities or individuals may be permitted to operate
commercial insurance business.

Article 7 Any legal persons or other organizations within
the territory of the People’s Republic of China that need insurance
coverage within the People’s Republic of China shall for the
purpose thereof apply to insurance companies established within the
territory of the People’s Republic of China.

Article 8 Insurance companies shall observe the principle
of fair competition in developing insurance business and shall not
engage in unfair competition.

Article 9 The insurance supervision and control authority
under the State Council shall be responsible for supervision and
control of the insurance industry in accordance with this Law.

Chapter II

Insurance Contracts

Section 1

General Provisions

Article 10 An insurance contract is an agreement whereby the
rights and obligations pertaining to insurance are specified and
agreed by the applicant and the insurer.

The applicant means the party who enters into an insurance
contract with an insurer and is obligated to pay the premiums under
the insurance contract.

The insurer means the insurance company, which enters into an
insurance contract with an applicant and is obligated to make
indemnity or pay insurance benefits.

Article 11 In concluding an insurance contract, the applicant
and the insurer shall abide by a fair, mutually beneficial,
consultative and voluntary principle and shall not infringe upon
public interests of society.

Insurance companies and other entities shall not constrain
others to enter into insurance contracts, except for such
insurances as have been made compulsory by laws and administrative
rules and regulations.

Article 12 An applicant shall have an insurable interest in the
subject matter of the insurance.

An insurance contract is null and void if the applicant has no
insurable interest in the subject matter of the insurance.

Insurable interest means the legally recognized interest, which
the applicant has in the subject matter of the insurance.

The subject matter of the insurance refers, as regards the
object of the insurance, either to the property of the insured and
related interests associated therewith, or to the life and the
person of the insured.

Article 13 An insurance contract is formed when an applicant
applies for and the insurer accepts insurance under the terms and
conditions agreed therefore by both parties. The insurer shall
issue to the applicant in good time, an insurance policy or other
insurance certificate, which indicates the terms and conditions as
agreed upon by both parties.

An insurance contract may take other written form than as
prescribed in the preceding paragraph upon mutual agreement of the
applicant and the insurer.

Article 14 Once an insurance contract is formed, the applicant
shall pay the premium in accordance with the terms of the contract
and the insurer shall begin to undertake the insurance liability
from the time agreed upon.

Article 15 Unless otherwise stipulated in this Law or agreed in
the insurance contract, the applicant may rescind the contract
after it is formed.

Article 16 Unless otherwise stipulated in this Law or agreed in
the insurance contract, the insurer may not rescind the contract
after it is formed.

Article 17 In concluding an insurance contract, the insurer
shall explain the contract terms to the applicant and may inquire
about the subject matter of the insurance or relevant circumstances
concerning the insured. The applicant shall make an honest
disclosure.

The insurer shall have the right to rescind the insurance
contract, if the applicant intentionally conceals the facts and
does not perform his obligation of making an honest disclosure, or
negligently fails to make disclosure, thereby materially affecting
the insurer making a decision whether or not to provide the
insurance or whether or not to increase the premium rate.

If an applicant intentionally fails to perform his obligation of
making an honest disclosure, as regards the insured event, which
occurs prior to the rescission of the contract, the insurer shall
bear no obligation for indemnification or payment of the insured
amount, or for returning the premiums paid.

If an applicant negligently fails to perform his obligation of
making an honest disclosure and this has a material effect on the
occurrence of an insured event, the insurer shall, in connection
with the insured event which occurred prior to the rescission of
the contract, bear no obligation for indemnification or payment of
the insured amount but may return the premiums paid.

The insured event means an event falling within the scope of
cover under the insurance contract.

Article 18 If there are exclusion clauses provided by the
insurer in the insurance contract, then the insurer shall make
precise and clear explanations in respect thereof to the applicant
when concluding the insurance contract, otherwise such clauses
shall have no effect.

Article 19 An insurance contract shall contain the following
particulars:

(1) name and address of the insurer;

(2) names and addresses of the applicant and the insured, and
name and address of the beneficiary in case of insurance of the
person;

(3) subject matter of the insurance;

(4) scope of cover and exclusions;

(5) period of insurance and commencement of liability of the
insurer;

(6) insured value;

(7) amount insured;

(8) premium and way of its payment;

(9) way of payment of indemnity or insurance benefits;

(10) liability arising from breach of contract and resolution of
disputes; and

(11) day, month and year of the conclusion of the contract.

Article 20       The
applicant and the insurer may include other particulars for matters
relating to the insurance contract besides those stipulated in the
preceding article.

Article 21       During the
period of validity of the insurance contract, the applicant and the
insurer may amend the contents of the insurance contract subject to
mutual agreement.

Where amendments to the insurance contract are made, the insurer
shall endorse them in the original policy or other insurance
certificates, or affix an endorsement slip thereto, or have a
written agreement of amendment made with the applicant.

Article 22       The
applicant, the insured or the beneficiary shall, in good time,
notify the insurer the occurrence of an insured event soon after
they knew it.

The insured refers to one whose property or person is protected
by the insurance contract and who is entitled to claim for the
insured amount. The applicant may also be the insured.

The beneficiary with respect to insurance of the person refers
to the one who, designated by the insured or the applicant, is
entitled to claim for the insurance benefits. The applicant or
the insured may also be the beneficiary.

Article 23       Where a
claim for indemnity or payment of insurance benefits is lodged with
the insurer after the occurrence of the insured event, the
applicant, the insured or the beneficiary shall, to the best of
their ability, provide the insurer with evidence and other material
relevant to ascertaining the nature, the cause and the extent of
the loss.

Based on the provisions of the insurance contract, the insurer,
in considering the relevant evidence or other material incomplete,
shall notify the applicant, the insured or the beneficiary to
provide supplementary evidence or other material.

Article 24       The insurer
shall, after receipt of a claim for indemnity or for payment of the
amount insured from the insured or the beneficiary, determine the
matter without delay, and inform the insured or the beneficiary of
the result of the determination. Where responsibility lies with the
insurer, the insurer shall fulfill its obligation for such
indemnity or payment within 10 days after agreement is reached with
the insured or the beneficiary on the amount of such indemnity or
payment. If there are stipulations in the insurance contract on the
sum insured and on the period within which indemnification or
payment should be made, then the insurer shall fulfill its
obligation accordingly.

If the insurer fails to fulfill its obligations as prescribed in
the preceding paragraph in a timely manner then, in addition to
payment of the amount insured, the insurer shall compensate the
insured or the beneficiary for any damage incurred thereby.

No entity or individual may illegally interfere with the
insurer’s fulfillment of its obligation for indemnification or
payment of the insured amount, or restrict the right of the insured
or the beneficiary to receive such payments.

The sum insured refers to the maximum amount, which the insurer
undertakes to pay for indemnity or for its insurance
obligations.

Article 25       After
receiving a claim for indemnity or payment of the sum insured from
the insured or the beneficiary, the insurer shall send to the
insured or the beneficiary, a notice declining indemnity or payment
of the sum insured for events not falling within the scope of
cover.

Article 26       If the
amount of indemnity or of the payment of insurance benefits cannot
be determined within 60 days of receipt of a claim for indemnity or
for payment of insurance benefits, together with relevant evidence
and information in respect thereof, the insurer shall first effect
primary payment of the minimum amount which can be determined by
the evidence and material in hand. The insurer shall
accordingly pay the balance after the amount of indemnity or of the
payment of insurance benefits is finally determined.

Article 27       With
respect to insurance other than life insurance, the right of the
insured or the beneficiary to claim for indemnity or payment of
insurance benefits shall lapse if the insured or the beneficiary
fails to exercise such right within two years from the date the
insured or the beneficiary is aware of the occurrence of the
insured event.

With respect to life insurance, the right of the insured or the
beneficiary to claim for payment of insurance benefits shall lapse
if the insured or the beneficiary fails to exercise such right
within five years from the date the insured or the beneficiary is
aware of the occurrence of the insured event.

Article 28       The insurer
is entitled to terminate the insurance contract and not to refund
the premiums if the insured or the beneficiary lies that an insured
event has occurred, and submits a claim for indemnity or payment of
insurance benefits, although such insured event has not
occurred.

If the applicant, the insured or the beneficiary fabricates the
occurrence of an insured event on purpose, the insurer is entitled
to terminate the insurance contract, and to bear no obligation for
indemnity or payment of insurance benefits, and except as otherwise
provided in the first paragraph of Article 65 of this Law, not to
refund the premiums either.

If the applicant, the insured or the beneficiary, following the
occurrence of an insured event, fabricates the cause of the
occurrence of the insured event or exaggerates the extent of the
loss with forged or altered relevant evidence, information or other
proofs, then the insurer shall bear no obligation for indemnity or
payment of insurance benefits for the portion which is fabricated
or exaggerated.

The applicant, the insured or the beneficiary shall refund to,
or indemnify the insurer for the purpose, payments of insurance
benefits or expenses incurred by the insurer due to the commission
of any of the acts stipulated in the foregoing three paragraphs of
this Article by the applicant, the insured or the beneficiary.

Article 29       Reinsurance
means the assignment by an insurer of part of its accepted business
to another insurer assuming the form of a contractor.

At the request of the reinsurance assignee, the insurance
assignor shall inform the former of its own liability and all
relevant information with respect to the original insurance.

Article 30       The
reinsurance assignee shall not demand payment of premiums by the
applicant of the original insurance.

The insured or the beneficiary of the original insurance shall
not lodge claims with reinsurance assignee for indemnity or payment
of insurance benefits.

The reinsurance assignor shall not decline or delay fulfilling
its own original obligations by reason of the non-performance of
the obligations of reinsurance assignee.

Article 31       If there is
any dispute between the insurer and the applicant, the insured or
the beneficiary, over the clauses in an insurance contract, the
People’s Courts or arbitration organizations shall interpret such
disputed clauses in favor of the insured and the
beneficiary.

Article 32       The insurer
or the reinsurance assignee shall be obligated to keep confidential
all information obtained in the course of conducting insurance
business regarding the business, financial position and individual
privacy of the applicant, the insured, the beneficiary or the
insurance assignor.

Section 2

Contract of Property Insurance

Article 33       A property
insurance contract means a contract of which the subject matter of
insurance is a piece of property and related interests associated
therewith.

A property insurance contract mentioned in this Section is
referred to for short as “the contract” unless specified
otherwise.

Article 34       Insurer
must be notified of the assignment of the subject matter of
insurance and after the consent of the insurer to continue the
insurance, the original insurance contract shall be altered
according to law, but except for cargo insurance contracts and
those contracts having otherwise specified.

Article 35       A cargo
insurance contract or an insurance contract for the carrier’s
voyage shall not be terminated by the parties thereto subsequent to
the commencement of insurance liability.

Article 36       The insured
shall observe all controls of the State pertaining to such areas as
fire prevention, safety, production operations and labour
protection, to ensure safety of the subject matter of
insurance.

In accordance with the terms of the contract, the insurer may
inspect the safety conditions of the subject matter of insurance
and, make timely suggestions in writing to the applicant or the
insured so as to eliminate unsafe factors and latent risks.

In the event that the applicant or the insured fails to fulfill
his contractual obligations to ensure the safety of the subject
matter of insurance, the insurer has the right to ask for an
increase in the premium or to terminate the contract.

The insurer may, with the consent of the insured, take
preventive measures to ensure the safety of the subject matter of
the insurance.

Article 37       If the
extent of risk attending the subject matter of insurance increases
during the period of the contract, the insured shall, in accordance
with the contract, notify the insurer in a timely manner, who shall
have the right to ask for an increase in the premium or terminate
the contract.

If the insured fails to notify the insurer as stipulated in the
preceding paragraph, the insurer shall bear no obligation for
indemnification where the occurrence of the insured event is caused
by the increased risk attending the subject matter of the
insurance.

Article 38       Unless
otherwise specified in the contract, the insurer shall reduce the
premium and refund correspondingly the part thereof calculated on
per diem basis in either of the following cases:

(1) a change occurs in relative circumstances under which the
insurance rate was determined, so that the risk attending the
subject matter of the insurance is noticeably reduced; or

(2) an obvious reduction occurs in the insurable value of the
subject matter of the insurance.

Article 39       Where an
applicant requests termination of the contract prior to
commencement of insurance liability, the applicant shall pay
service charges to the insurer and the insurer shall then refund
the premiums paid. If the applicant requests termination of
the contract subsequent to commencement of insurance liability, the
insurer may retain the premiums for the period from commencement of
insurance liability to the date of termination of the contract, and
shall refund the balance of the premiums to the
applicant.

Article 40       The
insurable value of the subject matter of insurance may be agreed by
the applicant and insurer and specified in the contract; or it may
be determined, at the occurrence of the insured event, on the basis
of the actual value of the subject matter of the
insurance.

The sum insured shall not exceed the insurable value; and the
part in excess shall be null and void.

Where the sum insured is less than the insurable value, the
insurer shall bear obligation for indemnity pro rata of the sum
insured to the insurable value, unless otherwise stipulated in the
contract.

Article 41       In the
event of double insurance, the applicant shall notify all insurers
concerned of relevant information with respect to such double
insurance.

Where the amount in aggregate of the sum insured by double
insurance exceeds the insurable value, the total amount of
indemnity paid by all insurers concerned shall not exceed the
insurable value. Unless specified otherwise in the contract,
the insurers concerned shall undertake their respective obligation
for indemnity in the proportion, which the sum insured by each of
them bears to the total amount of the sum insured.

Double insurance means such insurance wherein an applicant
enters into separate insurance contracts with two or more insurers
on the same subject matter of insurance, the same insurable
interests and the same insured event.

Article 42       At the
occurrence of an insured event, the insured is obligated to take
all necessary measures to prevent or mitigate loss, or
damage.

The insurer shall bear all necessary and reasonable expenses
incurred by the insured after the occurrence of the insured event
in taking measures to prevent or mitigate loss or damage of the
subject matter of the insurance; the amount of such expenses borne
by the insurer shall be calculated separately from the indemnity
for the loss of the subject matter of the insurance and it shall
not exceed the sum insured in the maximum.

Article 43       In the
event of partial loss of the subject matter of insurance, the
applicant may terminate the contract within 30 days after
indemnification by the insurer; unless specified otherwise in the
insurance contract, the insurer may also terminate the contract. In
the event that the insurer terminates the contract, the insurer
shall notify the applicant 15 days in advance of such termination
and refund to the applicant the premium for the portion of the
subject matter of insurance which is not lost or damaged after
deducting the earned premium for the subject matter of the
insurance which is not lost or damaged from the date of the
commencement of the insurance liability to the date of termination
of the contract.

Article 44       After the
occurrence of the insured event, if the insurer pays in full the
sum insured which is equal to the insurable value, the insurer
shall retain all rights pertaining to the lost or damaged subject
matter of insurance; if the sum insured is less than the insurable
value, the insurer shall obtain partial rights pertaining to the
lost or damaged subject matter of insurance pro rata of the sum
insured to the insurable value.

Article 45       When the
occurrence of the insured event results from the loss or damage to
the subject matter of insurance caused by a third party, the
insurer may, from the date when indemnity is paid to the insured,
exercise by subrogation the right of the insured to demand
indemnification against the third party up to the amount of
indemnity paid.

After the occurrence of the insured event referred to in the
preceding paragraph, the insurer may, when paying indemnity, deduct
therefrom a corresponding amount, which the insured has received as
indemnity from the third party.

The right to indemnity by subrogation exercised by the insurer
in accordance with the first paragraph shall in no way affect the
insured’s right to indemnity against the third party for the
portion un-indemnified.

Article 46       If the
insured waives the right to indemnity against the third party after
the occurrence of the insured event and before the insurer pays the
indemnity, the insurer shall bear no obligation for
indemnity.

If the insured, without the insurer’s consent, waives the right
to indemnity against the third party after indemnity is paid by the
insurer, the waiver shall be invalid.

The insurer may deduct a corresponding sum from the amount of
indemnity if it is not able to exercise the right to indemnity by
subrogation due to the fault of the insured.

Article 47       The insurer
has no right to indemnity by subrogation against any family member
or staff member of the insured unless the occurrence of the insured
event referred to in the first paragraph of Article 45 above has
resulted from the willful misbehavior of such a party.

Article 48       When the
insurer exercises the right to indemnity by subrogation against a
third party, the insured shall provide the insurer with necessary
documents and relevant information known to him.

Article 49       The insurer
shall bear all necessary and reasonable expenses incurred by the
insurer and the insured for the purpose of investigating and
ascertaining the nature and cause of the occurrence of the insured
event, and the extent of loss or damage to the subject matter of
the insurance.

Article 50       The insurer
may, in accordance with the provisions of law or the terms of an
insurance contract, directly indemnify a third party for loss or
damage caused him by the insured of a liability insurance
contract.

Insurance liability means insurance of which the subject matter
is the insurer’s liability to indemnify a third party according to
law.

Article 51       If the
insured of a liability insurance contract is brought to arbitration
or legal proceedings due to the occurrence of an insured event
which caused loss or damage to a third party, the insurer shall
bear the cost of such arbitration or legal proceedings and other
necessary and reasonable expenses paid by the insured, unless
provided otherwise in the insurance contract.

Section 3

Contract of Insurance of the Person

Article 52       A contract
of insurance of the person is an insurance contract of which the
subject matter of insurance is a person’s life and body.

The contract of insurance of the person mentioned in this
Section is briefly referred to as “the contract”, unless specially
designated.

Article 53       The
applicant has insurance interest in the following
persons:

(1) the applicant himself;

(2) the applicant’s spouse, children and parents; or

(3) apart from the above-mentioned, other family members and
close relatives bearing foster or support or maintenance
relationship with the applicant.

The stipulations in the preceding paragraph apart, the applicant
shall be deemed as having an insurance interest in the insured, if
the insured consent to the applicant concluding the contract for
him.

Article 54       If the age
of the insured is not correctly given by the applicant, and the
actual age of the insured does not fall within the age limit
specified by the contract, the insurer may terminate the contract
and refund the premiums to the applicant after deducting service
charge. However, this does not apply to cases where formation
of the contract has been over two years.

In the event that the applicant has wrongly given the age of the
insured, thus causing him to underpay the premiums, the insurer
shall have the right to rectify the mistake and demand the
applicant to pay the balance, or when paying insurance benefits,
reduce the payment in the proportion which the amount of premiums
actually paid bears to the amount that should have been paid.

In the event that the applicant has wrongly given the age of the
insured, thus causing him to overpay the premiums, then the insurer
shall refund the overpaid portion to the applicant.

Article 55       An
applicant shall not apply for and the insurer shall not provide
insurance of the person for one in want of capacity for civil acts,
taking death as a condition for payment of insurance
benefits.

The restriction stipulated in the preceding paragraph does not
apply to cases where parents apply for insurance of the person for
their minor children. However, the total amount of payments
for death shall not exceed the limit prescribed by the insurance
supervision and control authority.

Article 56       A contract
stipulating death as the term for payment of insurance benefits is
not valid unless it is agreed to in writing by the insured with the
amount of insurance approved by him.

An insurance policy signed and issued pursuant to a contract
prescribing death as the term for payment of insurance benefits may
not be transferred or pledged without the written consent of the
insured.

Where parents apply for insurance of the person on their minor
children, the restriction stipulated in paragraph one of this
Article shall not apply.

Article 57       After the
formation of the contract, the applicant may either pay the whole
of the premiums once for all or pay by installments in accordance
with the terms of the contract.

If the contract stipulates that the premium is to be paid by
installments, the applicant shall pay the first installment at the
conclusion of the contract and the other installments as
scheduled.

Article 58       Where the
contract specifies payment of the premiums by installments and the
applicant has paid the first installment but fails to pay the
current installment despite the lapse of over 60 days from the
scheduled date of payment, the validity of the contract is
suspended, or the insurer may, in accordance with the terms of the
contract, reduce the insured amount, unless stipulated otherwise in
the contract.

Article 59       The
validity of a contract that has been suspended in accordance with
the preceding Article can be reinstated upon agreement therefor
being reached between the insurer and the applicant and after the
making of the outstanding premium payment by the applicant.
However, the insurer is entitled to terminate the contract if no
agreement has been reached by both parties within two years from
the date of suspension of the validity of the contract.

Where an insurer terminates the contract in accordance with the
preceding paragraph when the applicant has paid the premiums for
two years or more, the insurer shall refund the cash value of the
policy in accordance with the contract. In the event that the
applicant has paid the premiums for less than two years, the
insurer shall refund the premiums with the service charge deducted
therefrom.

Article 60       The insurer
shall not resort to legal proceedings to demand payment by the
applicant of the premiums in respect of insurance of the
person.

Article 61       The
beneficiary of the insurance of the person shall be designated by
the insured or the applicant.

The designation of the beneficiary by the applicant is subject
to the approval of the insured.

If the insured is a person with no capacity for civil acts or a
person with limited capacity for civil acts, the beneficiary may be
designated by his guardian.

Article 62       The insured
or the applicant may designate one or more persons as the
beneficiaries.

In the event that there are more than one beneficiaries, the
insured or the applicant may specify the order of priority in their
enjoyment of the insurance benefits and their respective
proportions; if such proportions have not been defined, all the
beneficiaries shall share the insurance benefits in equal
proportions.

Article 63       The insured
or the applicant may change the beneficiary and notify the insurer
of this in writing. The insurer shall endorse the change on
the policy upon receipt of the notice.

The change of the beneficiary by the applicant shall be subject
to the consent of the insured.

Article 64       In the
event of the death of the insured, the amount of insurance shall be
treated as the deceased state, and the insurer shall, in any of the
following circumstances, be obligated to pay insurance benefits to
the legal heirs of the insured:

(1) where there is no designated beneficiary;

(2) where the beneficiary dies before the insured without other
beneficiary being designated; or

(3) where the beneficiary forfeits or surrenders his rights as
such in accordance with law without any other beneficiary.

Article 65       When the
applicant or the beneficiary has intentionally caused the death,
disability or illness of the insured, the insurer shall bear no
obligation to pay for the insurance. In the event that the
applicant has paid premiums for two years or more, the insurer
shall, in accordance with the contract, return the cash value of
the policy to other beneficiaries, who are entitled to their rights
as such.

If the beneficiary has intentionally caused the death or
disability of the insured, or attempted to cause the death of the
insured, the beneficiary shall forfeit his right to claim insurance
benefits.

Article 66       Where a
contract stipulates death as the term for payment of the insurance
benefits, then the insurer shall have no obligation to make such
payment if the insured commits suicide, except for the stipulations
in the second paragraph of this Article. However, the insurer
shall, as regards the insurance premiums already paid by the
applicant, return the cash value thereof in accordance with the
insurance policy.

Where a contract stipulates death as the term for payment of the
insurance benefits, the insurer may effect such payment in
accordance with the contract if the insured commits suicide two
years or more after the formation of the contract.

Article 67       Where death
or disability of the insured results from his intentional
committing a crime, the insurer shall have no obligation to effect
payment of the insurance benefits. If, however, the applicant has
paid premiums for two years or more, the insurer shall return the
cash value thereof to the insured in accordance with the insurance
policy.

Article 68       Where
insured events perils such as death, disability, or illness of the
insured in insurance of the person result from acts of a third
party, the insurer shall have no right of claim against the third
party by subrogation after payment of the insurance benefits to the
insured or the beneficiary. However, the insured or the beneficiary
shall still have the right to demand compensation from the third
party.

Article 69       Where an
applicant who has already paid in full the insurance premiums for
two years or more, terminates the contract, then the insurer shall
return the cash value of the policy within 30 days after receipt of
the notice of termination; if the applicant has paid the insurance
premiums for less than two years, then the insurer shall, in
accordance with the contract, return the premiums after deducting
the service charge.

Chapter III

Insurance Company

Article 70       An
insurance company shall take either of the following forms for its
organization:

(1) stock company with limited liability; or

(2) solely State-owned company.

Article 71       The
establishment of an insurance company is subject to the approval of
the insurance supervision and control authority.

Article 72       To
establish an insurance company, the following are
required:

(1) articles of Association in conformity with this Law and the
Company Law;

(2) a minimum registered capital as prescribed in this Law;

(3) senior management personnel with professional knowledge and
experience in business operations;

(4) a sound organizational structure and management systems;
and

(5) business premises conforming to requirements and other
facilities relative to the insurance business.

When examining the application for the establishment of an
insurance company, the insurance supervision and control authority
shall take into consideration the development of the insurance
industry and the need for fair competition.

Article 73       The minimum
registered capital required for the establishment of an insurance
company is RMB 200,000,000 yuan.

The minimum registered capital for the establishment of an
insurance company shall be fully paid-up in monetary form.

The insurance supervision and control authority may adjust the
amount of the minimum registered capital, in accordance with the
proposed scope of business and scale of operations; however, the
minimum capital shall not be less than that stipulated in the first
paragraph of this Article.

Article 74       For the
establishment of an insurance company, the applicant shall submit
the following documents and material:

(1) a formal written application giving therein the name,
registered capital and the scope of business of the proposed
insurance company;

(2) a feasibility study report; and

(3) other documents and information required by the insurance
supervision and control authority.

Article 75       Where an
application of the establishment of an insurance company has been
approved in preliminary examination, the applicant shall begin
preparations for its establishment in accordance with this Law and
the Company Law. The applicant who meets the requirements of
establishment stipulated in Article 71 of this Law shall submit to
the insurance supervision and control authority a formal completed
form of application together with the following documents and
material:

(1) articles of Association of the insurance company;

(2) a list of shareholders and their shares, or the investors
and the amount of their investment;

(3) a certificate of the credit standing and relevant
information of those shareholders holding 10% or more of the
company’s shares;

(4) a certificate verifying the paid-up capital issued by a
statutory institution;

(5) resumes and proofs of qualification of proposed senior
management personnel;

(6) operation strategy and business plan;

(7) details of business premises and other facilities related to
the insurance business; and

(8) other documents and material requested by the insurance
supervision and control authority.

Article 76       The
insurance supervision and control authority shall make a decision
approving or disapproving the application, within six months from
the date of receipt of the formal application to establish an
insurance company.

Article 77       An
insurance company whose establishment has been approved shall be
issued by the approving department a license to carry on insurance
business, which shall be used to affect registration with and
obtain a business license from the administrative department of
industry and commerce.

Article 78       The license
to carry on insurance business will be invalidated of itself if the
insurance company fails to complete its registration without any
proper reasons, within six months from the date of receipt of the
insurance license.

Article 79       Upon its
establishment, an insurance company shall deposit 20% of its total
registered capital with a bank designated by the insurance
supervision and control authority as guarantee fund; this guarantee
fund shall not be used except for repayment of debts when the
company is liquidated.

Article 80       An
insurance company that intends to establish a branch office within
or outside the territory of the People’s Republic of China shall
need to obtain the approval of the insurance supervision and
control authority and to obtain a license to carry on insurance
business for such branch office.

The branch offices of an insurance company do not possess the
status of a legal person; and their civil liability shall be borne
by the insurance company.

Article 81       Approval by
the insurance supervision and control authority is required for the
establishment of any representative office of an insurance company
within or without the territory of the People’s Republic of
China.

Article 82       Approval by
the insurance supervision and control authority is required for any
of the following changes to an insurance company:

(1) change of the name of the insurance company;

(2) change in the amount of the registered capital;

(3) change of business premises of the company or its branch
offices;

(4) adjustment of the scope of business;

(5) division or merger of the company;

(6) amendment to its articles of association;

(7) change of investors or shareholders who hold 10% or more of
the company’s shares; or

(8) other changes as specified by the insurance supervision and
control authority.

An insurance company shall report any changes of its chairman
and its general manager to the insurance supervision and control
authority for examination of their qualifications for the
positions.

Article 83       The
provisions of the Company Law shall apply to the organizational
structure of an insurance company.

Article 84       A solely
State-owned insurance company shall have a Board of Supervisors
comprising representatives of the insurance supervision and control
authority, relevant experts, and employees of the insurance
company. The board of supervisors shall exercise supervision
with respect to the solely State-owned insurance company, over
matters such as the drawing of reserve funds, the minimum solvency
margin, the maintenance of the value of State owned assets, the
value-added State-owned assets, as well as over acts of its senior
management personnel in respect of violations of law,
administrative rules and regulations or the articles of association
and acts considered detrimental to the company’s
interest.

Article 85       In the
event of division or merger of an insurance company, or by virtue
of the presence of a cause for its dissolution as stipulated by the
company’s articles of association, the insurance company shall be
dissolved only upon the approval of the insurance supervision and
control authority. The insurance company shall in accordance with
law form a liquidation group to carry out the
liquidation.

Those insurance companies, which include life insurance in their
business may not be dissolved, only divided or merged.

Article 86       An
insurance company shall be eliminated according to law in the event
that its insurance license is revoked by the insurance supervision
and control authority due to its violation of law, or
administrative rules and regulations. The insurance supervision and
control authority shall appoint in time a liquidation committee to
carry out the liquidation.

Article 87       In the
event that an insurance company is unable to pay its debts when
due, it can be declared bankrupt by the People’s Court in
accordance with law, with the consent of the insurance supervision
and control authority. If an insurance company is declared
bankrupt, the People’s Court shall organize a liquidation committee
to be composed of the insurance supervision and control authority,
other relevant departments and relevant personnel to carry out the
liquidation.

Article 88       In the
event that an insurance company which includes life insurance in
its business is eliminated according to law or declared bankrupt
according to law, all life insurance contracts and reserve funds in
its possession must be transferred to other insurance companies
that include life insurance in their business activities; if no
agreement can be reached with respect to such transfer with other
insurance companies, the insurance supervision and control
authority shall, for the purpose thereof, designate an insurance
company that includes life insurance in its business operations to
accept the transfer.

Where life insurance contracts and reserve funds, as prescribed
in the preceding paragraph, are transferred to or accepted by
another insurance company designated by the insurance supervision
and control authority, the legitimate rights and interests of the
insured and the beneficiary shall be preserved.

Article 89       In the
event of bankruptcy of an insurance company according to law, the
bankrupt State shall, after giving priority to paying off the
expenses of bankruptcy proceedings, be used for payment of debts in
the following order:

(1) wages, salaries and social insurance expenses due to its
employees;

(2) indemnity or payment of the insurance benefits;

(3) unpaid taxes and duties; and

(4) cleaning off the company debts.

Where the State is insufficient to cover all the claims having
the same order of priority, then settlement shall be made on a pro
rata basis.

Article 90       When an
insurance company ceases its business operations in accordance with
law, its license to carry on insurance business shall be
canceled.

Article 91       In the
absence of provisions in this Law, with regard to such matters as
the establishment of, changes to, dissolution and liquidation of an
insurance company, the Company Law and other relevant laws and
administrative rules and regulations shall apply.

Chapter IV

Rules Governing Insurance Business

Article 92       The scope
of business of an insurance company shall be as follows:

     (1) property insurance, which
includes insurance against loss or damage to property, liability
insurance and credit insurance;

     (2) insurance of the person which
includes life insurance, health insurance and accident and injury
insurance.

     No insurer may concurrently
engage in both the business of property insurance and insurance of
the person; however, an insurance company engaged in the business
of property insurance may, upon approval by the insurance
supervision and control authority, operate the short-term business
of health insurance and accidental injury insurance.

    The scope of business of an insurance
company is subject to the approval of the insurance supervision and
control authority. An insurance company shall only operate its
insurance business within the scope of business
approved.

   No insurance company may concurrently engage
in the business other than that provided for by this Law or other
laws, or administrative rules and regulations.

Article 93       Subject to
approval by the insurance supervision and control authority,
insurance companies may engage in the following reinsurance
business with respect to the insurance business prescribed in the
preceding article:

(1) outward reinsurance; and/or

(2) inward reinsurance.

Article 94       Insurance
companies shall, in accordance with the principle of safeguarding
the interests of the insured and guaranteeing the capability of
reimbursement, set aside all liability reserve funds.

       Specific measures for
setting aside and carrying forward the liability reserve funds to
be done by insurance companies shall be formulated by the insurance
supervision and control authority.

Article 95       Insurance
companies shall set aside a reserve fund for undetermined
indemnities pursuant to claims already made or insurance benefits
paid, and to claims not yet made nor insurance benefits paid
subsequent to the occurrence of the insured event.

Article 96       In addition
to the reserve funds described in the preceding two articles,
insurance companies shall collect accumulated fund in accordance
with relevant laws, administrative rules and regulations and
stipulations of the State financial and accounting
systems.

Article 97       In order to
protect the interests of the insured, and to ensure their own
steady and healthy operation, insurance companies shall contribute
to an insurance protection fund through making deductions pursuant
to the provisions of the insurance supervision and control
authority.

The insurance protection fund shall be under centralized
management and used on the basis of overall planning and
arrangement.

Specific measures for control and use of the insurance
protection fund shall be formulated by the insurance supervision
and control authority.

Article 98       An
insurance company shall maintain a minimum solvency commensurate
with the size of its business. After deduction of the amount
of its actual liability from the value of its actual assets, the
balance shall not be less than the amount specified by the
insurance supervision and control authority. In the event that the
balance is less than the amount stipulated, its equity capital
shall be replenished to make up the difference.

Article 99       For those
insurance companies engaged in property insurance business, the
premiums retained for the current year shall not exceed four times
the combined total of its paid-up capital and its accumulated
fund.

Article 100      The liability
borne by an insurance company for each risk unit, that is, the
liability of an insurance company that might arise from the maximum
loss or damage caused by the occurrence of a single insured event,
shall not exceed 10% of the combined total of its paid-up capital
and its accumulated fund. Reinsurance shall be arranged for
the portion in excess of this sum.

Article 101      The method of
computation of an insurance company and its plan for managing huge
calamities in respect of a risk unit shall be submitted to the
insurance supervision and control authority for
approval.

Article 102      An insurance
company shall arrange reinsurance in accordance with the relevant
provisions specified by the insurance supervision and control
authority.

Article 103      Where an
insurance company needs to put through outward reinsurance
business, it shall give priority to insurance companies established
within the territory of the People’s Republic of China.

Article 104      The insurance
supervision and control authority shall have the authority to
restrict or prohibit insurance companies from handling outward
reinsurance business with insurance companies situated outside the
territory of the People’s Republic of China or from accepting
inward reinsurance business from outside the territory of the
People’s Republic of China.

Article 105      An insurance
company shall employ its funds in a steady manner, follow the
safety principle and ensure that its assets be maintained and
increased in value.

The employment of funds of an insurance company is limited to
bank deposits, bringing and selling of government and financial
bonds and other forms of fund stipulated by the State Council.

No funds of an insurance company may be employed for the
establishment of institutions dealing in bonds or securities or for
the establishment of enterprises other than insurance
companies.

The funds employed by an insurance company and the percentage of
the total amount, of funds employed in each specific item shall be
prescribed by the insurance supervision and control authority.

Article 106      An insurance
company and its employees shall not commit any of the following
acts in their business activities:

(1) deceiving the applicant, the insured or the beneficiary;

(2) concealing from the applicant material information relevant
to the insurance contract;

(3) preventing the applicant from fulfilling his obligation of
making a full and accurate disclosure as provided for in this Law
or inducing him not to fulfill such obligation;

(4) promising the applicant, the insured or the beneficiary to
give them premium rebates or other benefits which are not specified
in the insurance contract; or

(5) settling a false claim by purposely making up an insured
event that never happens, to obtain insured amount by fraudulent
means.

Chapter V

Supervision and Control of the Insurance Industry

Article 107      The insurance
clauses and premium rates for risks insured that have a bearing on
the interests of the public, for risks that are compulsorily
insured in accordance with law, and for the newly developed life
insurance shall be submitted to the insurance supervision and
control authority for examination and approval. When conducting
examination before giving approval, the insurance supervision and
control authority shall abide by the principle of protecting the
interests of the public and preventing unfair competition. The
scope of and specific measures for examination and approval shall
be formulated by the insurance supervision and control
authority.

The insurance clauses and premium rates for other insured risks
shall be submitted to the insurance supervision and control
authority for the record.

       Article
108      The insurance supervision and
control authority shall establish a sound indicator system for
supervision and control over the solvency of insurance companies,
in order to exercise supervision and control over the minimum
solvency of the companies.

Article 109      The insurance
supervision and control authority shall have the authority to
inspect the business situation, financial situation and employment
of funds situation of an insurance company, and shall have the
authority to request an insurance company to furnish relevant
written reports and information within a prescribed period of
time.

An insurance company shall accept supervision and inspection in
accordance with law.

The insurance supervision and control authority shall have the
power to inquire of financial institutions about the deposits of
insurance companies.

Article 110      Where an
insurance company fails to set aside or carry forward various
reserve funds, or fails to carry out reinsurance in accordance with
this Law, or seriously violates the provisions of this Law
governing the employment of funds, the insurance supervision and
control authority shall direct the insurance company to take the
following measures for rectification within a prescribed period of
time:

(1) setting aside or carrying forward various reserve funds
in accordance with law;

(2) carrying out reinsurance in accordance with law;

(3) correcting acts of illegally employing the funds; or

(4) replacing its person in charge and relevant management
personnel involved.

Article 111      Pursuant to the
stipulations of the preceding article, in the event that an
insurance company fails to correct the situation within the
prescribed period, after it has been directed to do so by a
decision of rectification of the insurance supervision and control
authority, the latter department shall then select insurance
professionals and designate relevant personnel from the insurance
company to form a rectification task force to carry out the
rectification work of the said insurance company.

The decision of rectification shall be publicized, giving the
name of the insurance company referred to, the reason for
rectification, the composition of the rectification task force as
well the period of rectification.

Article 112      In the course of
the rectification, the rectification task force shall have the
authority to supervise the daily business operation of the said
insurance company. The person in charge and relevant personnel
of the insurance company shall perform their respective functions
under the supervision of the rectification task force.

Article 113      In the course of
the rectification, the existing business of the insurance company
may be continued. The insurance supervision and control authority
shall, however, have the authority to stop the insurance company
from developing new business, or to suspend part of its business,
or to make adjustment in employment of its funds.

Article 114      Where an
insurance company under rectification has, subsequent to the
rectification, corrected its violations of this Law and has resumed
its normal business operations, the rectification shall cease after
the report submitted by the rectification task force is approved by
the insurance supervision and control authority.

Article 115      Where an
insurance company violates the provisions of this Law and impairs
the public interest of society, by which it might seriously
jeopardize or has already jeopardized its solvency, the insurance
supervision and control authority may implement a take-over of the
said insurance company.

The purpose of such a take-over is to adopt necessary measures
to protect the interests of the insured and resume the normal
operations of the insurance company. The credit-debt situation
of the insurance company taken over shall not change as a result of
the take-over.

Article 116      The composition
of the take-over task force and the implementing procedure of the
take-over shall be determined and publicized by the insurance
supervision and control authority.

Article 117      Where the term
of the take-over expires, the insurance supervision and control
authority may determine to extend it. However, the maximum
term of the take-over may not exceed two years.

Article 118      Where the term
of the take-over expires and the insurance company has resumed its
normal operational capacity, the insurance supervision and control
authority may determine to terminate the take-over.

     Where the take-over task force
deems that the assets of the insurance company taken over are no
longer sufficient to meet its liabilities, the take-over task force
may, with the approval of the insurance supervision and control
authority, apply to the People’s Court to have the said insurance
company declared bankrupt in accordance with law.

Article 119      An insurance
company shall submit its business reports, financial and accounting
reports and related Statements for the preceding year to the
insurance supervision and control authority within three months
after the end of each fiscal year, and publicize such reports and
statements in accordance with law.

Article 120      An insurance
company shall submit to the insurance supervision and control
authority its business statistics Statements for the preceding
month by the end of each month.

Article 121      Insurance
companies shall appoint and employ actuarial professionals
recognized by the insurance supervision and control authority and
establish an actuarial report system.

Article 122      Insurance
companies shall see to it that matters of insurance business are
truthfully recorded in the business reports, financial and
accounting reports, actuarial reports and other relevant
statements, documents and materials and that there are no false
records, misleading statements or major omissions.

Article 123      The insurer and
the insured may employ independent loss adjusting organizations
established in accordance with law or experts having statutory
qualifications, to carry out adjustments and appraisals as regards
losses and damages resulting from the occurrence of insured
events.

The loss adjusting organizations or experts employed according
to law to carry out adjustments and appraisals of insured events
shall conduct their business impartially in accordance with law.
Where losses or damages are caused to the insurer or the insured
intentionally or by mistake, the organizations or experts shall
bear the liability to pay compensation in accordance with law.

The loss adjusting organizations employed according to law to
carry out adjustments and appraisals of insured events shall
collect charges in accordance with the provisions of laws,
administrative rules and regulations.

Article 124      An insurance
company shall properly keep its complete account books, original
vouchers as well as relevant material with respect to its business
operations.

The accounting books, original vouchers and other relevant
material stipulated in the preceding paragraph should be kept for
not less than 10 years beginning from the date of the termination
of the contract.

Chapter VI

Insurance Agents and Insurance Brokers

Article 125      An insurance
agent is an entity or individual that has been authorized by an
insurer to transact insurance business on its behalf within the
scope of authorization and gets in return agent’s handling fees to
be collected from the insurer.

Article 126      An insurance
broker is an entity that, in the interest of the applicant,
provides intermediary services between the applicant and the
insurer for the conclusion of an insurance contract and receives a
commission therefor in accordance with law.

Article 127      Where the
insurer authorizes an insurance agent to transact insurance
business on its behalf, it shall sign an agreement to such an
effect with the insurance agent, in which the rights and
obligations of both parties and other agency matters are agreed
upon according to law.

Article 128      The insurer
shall be liable for the acts of its agents when they transact
insurance business on behalf of the insurer in pursuance of the
authorization.

Where an insurance agent, when transacting insurance business on
behalf of the insurer, oversteps the authority delegated and the
applicant has good reason to believe that it has the authority of
agency, and has concluded an insurance contract with it, it shall
bear the insured liability. However, the insurer may, in accordance
with law, investigate the responsibility of the insurance agent
that oversteps the authority delegated to it.

Article 129      When transacting
life insurance business, no individual insurance agents may accept
authorization from two or more insurers concurrently.

Article 130      An insurance
broker shall be liable for loss or damages caused to the applicant
or the insured due to his fault in the course of transacting
insurance business.

   Article
131       When transacting insurance
business, no insurance agents or brokers may commit any of the
following acts:

       (1)  
deceiving the insurer, applicant, insured or
beneficiary;

       (2)  
concealing material information with respect to the insurance
contract;

       (3)  
preventing the applicant from fulfilling his obligation of making a
full and accurate disclosure, or inducing the applicant not to
fulfill his obligation of making a full and accurate
disclosure;

       (4)  
promising to give the applicant, the insured or the beneficiary
benefits other than the ones provided for in the insurance
contract; or

(5)   by taking advantage of the administrative
powers and position, or of the occupational facilities, or by
employing other illegitimate means, coercing or inducing the
applicant to enter into an insurance contract.

Article 132      An insurance
agent or an insurance broker shall meet the qualification
requirements prescribed by the insurance supervision and control
authority and shall obtain an insurance agent license or an
insurance broker license, issued by the insurance supervision and
control authority, with which to register with the industry and
commerce administration authorities, get a business license
therefrom and pay a guarantee deposit or buy insurance to cover
professional liability.

Article 133      An insurance
agent or an insurance broker shall have his own business site, set
up special account book for keeping revenue and expenditure in
connection with the business of the insurance agent or the
insurance broker, and shall be subject to the supervision of the
insurance supervision and control authority.

Article 134      The service fees
for insurance agents and commissions for insurance brokers shall
only be paid to the legally qualified insurance agents and
insurance brokers, not to any other persons.

Article 135      An insurance
company shall keep a register of its insurance agents.

Article 136      Insurance
companies shall improve training and management of the insurance
agents to enhance their professional ethics and competence, and
they may not instigate or mislead them to conduct or into
conducting activities in violation of the obligation of good
faith.    

Article 137      The provisions
of Articles 109 and 119 of this Law shall apply to insurance agents
and insurance brokers.

Chapter VII

Legal Liabilities

Article 138      An applicant, an
insured or a beneficiary, who commits insurance fraud by means of
any of the following acts, which constitutes a crime, shall be
investigated for his criminal responsibility in accordance with
law:

(1)   in the case of the applicant, deliberately
falsifying the subject matter of the insurance and swindling the
insured amount out of the insurer;

       (2)  
falsely alleging the occurrence of an insured event which in fact
has not occurred, and swindling the insured amount out of the
insurer;

       (3)  
deliberately causing the occurrence of an event which leads to
property damage and obtaining the insured amount by fraudulent
means;

       (4)  
deliberately causing the occurrence of such insured events in the
insurance of the person as death of the insured, injury and
disability, or illness and obtaining the insured amount by
fraudulent means; whereupon an insurance claim is fraudulently
made; or

       (5)  
forging or tampering with certifications, data or other evidence
related to the occurrence of the insured event, or abetting,
instigating or bribing others to adduce false evidence, data, or
other proofs, or cooking up the cause of the occurrence of the
insured event or overstating the extent of loss, thereby obtaining
the insured amount by fraudulent means.

       Administrative
sanctions shall be imposed in accordance with the relevant
regulations of the State if the circumstances attending any of the
acts listed in the preceding paragraphs are minor and do not
constitute a crime.

   Article
139       Where an insurance company
or one of its staff members, when transacting insurance business,
conceals material information with respect to the insurance
contract, and deceives the applicant, the insured or the
beneficiary, or where the insurance company refuses to fulfill its
obligation agreed to in the insurance contract to pay indemnity or
insurance benefits, which constitute a crime, the insurance company
shall be investigated for criminal responsibility in accordance
with law. If the violation is not serious enough to constitute a
crime, the insurance supervision and control authority shall impose
on the insurance company a fine of not less than 50,000 yuan but
not more than 300,000 yuan; the staff member who violates the law
shall be fined not less than 20,000 yuan but not more than 100,000
yuan; and if the circumstances are serious, restrictions shall be
imposed on the business scope of the insurance company or the
company shall be instructed to cease accepting new insurance
business.

 An insurance company or one of its staff members that
prevents the applicant from fulfilling his obligation of making a
full and accurate disclosure, or induces the applicant not to
fulfill his obligation of making a full and accurate disclosure, or
promises to give unlawful premium rebates or other benefits to the
applicant, the insured or the beneficiary, which constitutes a
crime, shall be investigated for criminal responsibility in
accordance with law; if the violation is not serious enough to
constitute a crime, the insurance company shall be instructed by
the insurance supervision and control authority to make
rectification and shall be fined not less than 50,000 yuan but not
more than 300,000 yuan; the staff member who violates the law shall
be fined not less than 20,000 yuan but not more than 100,000 yuan;
and if the circumstances are serious, restrictions shall be imposed
on the business scope of the insurance company or the company shall
be instructed to cease accepting new insurance business.

Article 140      Where an
insurance agent or an insurance broker deceives the insurer, the
applicant, the insured or the beneficiary in his business
operations, which constitutes a crime, the insurance agent or the
insurance broker shall be investigated for criminal responsibility
in accordance with law; if the violation is not serious constitute
a crime, the insurance supervision and control authority shall
instruct him to make rectification and impose upon him a fine of
not less than 50,000 yuan but not more than 300,000 yuan; and if
the circumstances are serious, the business license of the
insurance agent or the insurance broker shall be
revoked.

Article 141      Where an
insurance company or one of its staff members deliberately
fabricates the occurrence of an insured event and falsely settles a
fictitious claim, thereby swindling the insured amount, which
constitutes a crime, the insurance company or the staff member
shall be investigated for criminal responsibility in accordance
with law.

Article 142      Anyone who, in
violation of the provisions of this law, establishes an insurance
company or illegally engages in commercial insurance business shall
be outlawed by the insurance supervision and control authority; if
the violation constitutes a crime, he shall be investigated for
criminal responsibility in accordance with law; if the
circumstances are not serious enough to constitute a crime, his
unlawful gains shall be confiscated by the insurance supervision
and control authority, and he shall be fined not less than the
amount of, but not more than five times the amount of, the unlawful
gains; and if there are no unlawful gains or the amount of the
unlawful gains is less than 200,000 yuan, he shall be fined not
less than 200,000 yuan but not more than one million
yuan.

Article 143      Where an
insurance company, in violation of the provisions of this law,
engages in insurance business beyond the scope of business approved
or concurrently engages in the business other than that provided
for by this Law, or other laws, or administrative rules and
regulations, which constitutes a crime, it shall be investigate for
criminal responsibility in accordance with law; if the
circumstances are not serious enough to constitute a crime, the
insurance supervision and control authority shall instruct the
insurance company to make rectification and to return the premiums
collected, shall confiscate its unlawful gains and shall impose on
it a fine of not less than one time the amount of, but not more
than five times the amount of, its unlawful gains; and if there are
no unlawful gains or the amount of the unlawful gains is less than
100,000 yuan, it shall be fined not less than 100,000 yuan but not
more than 500,000 yuan; and if the insurance company fails to make
rectification within the specified time limit or if the
consequences are serious, the said authority shall instruct it to
suspend business operation for rectification or revoke its
insurance business license.

Article 144      Whoever, in
violation of the provisions of this Law and without being approved,
arbitrarily makes changes in the name, articles of association,
registered capital of the insurance company, its business site or
that of its branches, shall be subject to the direction of the
insurance supervision and control authority for correction and the
imposition of a fine of not less than 10,000 yuan but not more than
100,000 yuan.

Article 145      Whoever, in
violation of the provisions of this Law, commits any of the
following acts, shall be subject to the direction of the insurance
supervision and control authority for correction and the imposition
of a fine of not less than 50,000 yuan but not more than 300,000
yuan; where the circumstances are severe, the insurance supervision
and control authority may restrict the scope of business, direct
the company to cease accepting new business or revoke the insurance
business license:

(1) failing to set up a guarantee fund as required or using the
guarantee fund in violation of the provisions;

(2) failing to set aside or carry forward all the liability
reserve funds, or set aside an outstanding loss reserve, as
required;

(3) failing to contribute to the insurance guarantee fund or the
accumulated reserve fund as required;

(4) failing to effect outward reinsurance as required;

(5) employing the funds of the insurance company in violation of
the provisions;

(6) establishing branches or representative offices without
approval;

(7) carrying out a division or a merger of the company without
approval; or

(8) failing to submit for examination and approval the insurance
clauses and premium rates for risks, as required.

Article 146      Whoever, in
violation of the provisions of this Law, commits either of the
following acts, shall be subject to the direction of the insurance
supervision and control authority to correct the wrong, and the
imposition of a fine of not less than 10,000 but nor more than
100,000 yuan, if he/she fails to correct the wrong within a
prescribed period of time:

(1) failing to submit relevant reports, statements, documents
and information as required; or

(2) failing to submit for the record the insurance clauses and
premium rates for risks, as required.

Article 147      Where an
insurance company, in violation of the provisions of this Law,
commits one of the following acts, which constitutes a crime, it
shall be investigated for criminal responsibility in accordance
with law; if the circumstances are not serious enough to constitute
a crime, the insurance supervision and control authority shall
instruct the insurance company to make rectification and shall
impose on it a fine of not less than 100,000 yuan but not more than
500,000 yuan; and if the circumstances are serious, the authority
may impose restrictions on its scope of business, instruct it to
cease accepting new insurance business or revoke its insurance
business license:

       (1) submitting
false reports, statements, documents and information; or

       (2) refusing to
accept or hindering inspection and supervision conducted in
accordance with law.

Article 148      Whoever, in
violation of the provisions of this Law, commits any of the
following acts, shall be subject to the direction of the insurance
supervision and control authority to correct the wrong, and the
imposition of a fine of not less than 50,000 yuan but not more than
300,000 yuan:

(1) underwriting insurance for the subject matter thereof in
excess of its insurable value, where the circumstances are serious;
or

(2) underwriting life insurance where death is the prerequisite
for the payment of the insurance benefits, for those who have no
capacity for civil acts.

Article 149      Any unit that,
in violation of the provisions of this Law and without the license
for insurance agent business or insurance brokerage business,
illegally engages in insurance agent business or insurance
brokerage business shall be outlawed by the insurance supervision
and control authority; if the violation constitutes a crime, it
shall be investigated for criminal responsibility in accordance
with law; if the circumstances are not serious enough to constitute
a crime, the said authority shall confiscate its unlawful gains and
impose on it a fine of not less than the amount of, but not more
than five times the amount of, the unlawful gains; and if there are
no unlawful gains or the amount of the unlawful gains is less than
100,000 yuan, it shall be fined not less than 100,000 yuan but not
more than 500,000 yuan.

Article 150      With regard to
the senior managers and other persons of an insurance company who
are directly responsible for a violation of the provisions of this
Law, which is not serious enough to constitute a crime, the
insurance supervision and control authority may, on the merits of
each case, give a disciplinary warning, instruct to have them
replaced, or impose a fine of not less than 20,000 yuan but not
more than 100,000 yuan.

Article 151      Whoever, in
violation of the provisions this Law, causes damage or loss to
others, shall bear civil liability therefor in accordance with
law.

Article 152      An official who
approves the application for establishment of an insurance company
which does not meet the requirements stipulated by this Law, or
approves the application for insurance agent or insurance broker
which does not meet the requirements stipulated by this Law, or
commits other acts by abusing their powers or neglecting their
duties, which constitutes a crime, shall be investigated for
criminal responsibility in accordance with law; and if the
violation is not serious enough to constitute a crime, he shall be
given administrative sanctions in accordance with law.

Chapter VIII

Supplementary Provisions

Article 153      The Maritime
Code of the People’s Republic of China shall be applicable to
marine insurance. For matters where the Maritime Code does not
specify, this Law shall apply.

Article 154      This Law shall
be applicable to Chinese-foreign equity insurance companies, wholly
foreign-funded insurance companies and branches of foreign
insurance companies; where other laws and administrative rules and
regulations provide otherwise, the provisions there shall
prevail.

Article 155      The State
supports the development of insurance businesses, which facilitate
agricultural production. Agricultural insurance shall be
governed by other laws and administrative rules and
regulations.

Article 156      Insurance
institutions not in the nature of insurance companies as provided
by this Law shall be governed by other laws and administrative
rules and regulations.

Article 157      Insurance
companies established prior to the implementation of this Law upon
approval in accordance with the regulations of the State Council
shall continue to exist. Those which do not fully meet the
requirements stipulated in this Law shall satisfy the requirements
within a prescribed period of time. Specific measures shall be
formulated by the State Council.

Article 158      This Law shall
go into effect as of October 1, 1995.

(Legislative Affairs Commission of the Standing Committee of the
National People’s Congress)