Regulations of the People’s Republic of China on Administration of Foreign-funded Insurance Companies

(Adopted at the 49th Executive Meeting of the State Council
on December 5, 2001, promulgated by Decree No. 336 of the State
Council of the People’s Republic of China on December 12, 2001, and
effective as of February 1, 2002)

Chapter I General Provisions

Article 1 These Regulations are formulated to
meet the need of opening up to the outside world and developing
economy, to strengthen and improve the supervision and
administration of foreign-funded insurance companies, and to
promote the healthy development of the insurance industry.

Article 2 The term of “foreign-funded insurance
companies”, as used in these Regulations, refers to the following
insurance companies that are approved to be established and to
operate within the territory of China in accordance with relevant
laws and administrative regulations of the People’s Republic of
China:

(1) insurance companies which are funded and operated within the
territory of China by foreign insurance companies jointly with
Chinese companies or enterprises (hereinafter referred to as joint
venture insurance companies);

(2) insurance companies which are solely funded and operated
within the territory of China by foreign insurance companies
(hereinafter referred to as solely-foreign-funded insurance
companies); and

(3) branches of foreign insurance companies within the territory
of China (hereinafter referred to as branches of foreign insurance
companies).

Article 3 Foreign-funded insurance companies
shall abide by the laws and regulations of China and shall not
infringe upon the social and public interests of China.

The legitimate business activities and lawful rights and
interests of foreign-funded insurance companies are protected by
the laws of China.

Article 4 The China Insurance Regulatory
Commission (hereinafter referred to as CIRC) is responsible for the
supervision and administration of foreign-funded insurance
companies. The agencies of CIRC exercise routine supervision and
administration on foreign-funded insurance companies within their
respective jurisdictions according to the powers delegated by
CIRC.

Chapter II Establishment and Registration

Article 5 The establishment of a foreign-funded
insurance company shall be approved by CIRC.

Regions where foreign-funded insurance companies may be
established shall be determined by CIRC in accordance with relevant
provisions.

Article 6 For foreign-funded insurance
companies to engage in insurance of the person or property
insurance business, their establishment form and foreign investment
proportion shall be determined by CIRC in accordance with relevant
provisions.

Article 7 The minimum registered capital
requirement of a joint venture insurance company or a
solely-foreign-funded insurance company is RMB 200,000,000 yuan or
its equivalent of a freely convertible currency; the minimum
registered capital must be fully paid-up in currency. The
contribution of foreign insurance companies shall be made in freely
convertible currencies.

A branch of a foreign insurance company shall be allocated as
its operating fund by its headquarter company a free sum of freely
convertible currencies equivalent to not less than RMB 200,000,000
yuan.

CIRC may, according to the business scope and operation scale of
a foreign-funded insurance company, increase the minimum
requirement of the registered capital or operating fund provided
for in the preceding two paragraphs.

Article 8 A foreign
insurance company applying to establish a foreign-funded insurance
company shall meet the following requirements:

(1) It has engaged in insurance business for not less than 30
years;

(2) It has maintained a representative office within the
territory of China for not less than 2 years;

(3) It possessed total assets of not less than US$5,000,000,000
at the end of the year prior to the submission of its establishment
application;

(4) The country or region where it is domiciled has a sound
system of insurance supervision and administration, and it is under
the effective supervision and administration by the relevant
competent authorities of the country or region;

(5) It satisfies the solvency standards of the country or region
where it is domiciled;

(6) The relevant competent authorities of the country or region
where it is domiciled consents to its application; and

(7) It meets other prudent requirements prescribed by CIRC.

Article 9 To establish a foreign-funded
insurance company, the applicant shall submit an application to
CRIC in writing, together with the following materials:

(1) an application signed by the legal representative of the
applicant, or, where a joint venture insurance company is applied
for, jointly signed by the respective legal representatives of each
joint party;

(2) a duplicate of the foreign applicant’s business license, a
certification proving that the foreign applicant satisfies the
solvency standards, and the opinion on the application issued by
the relevant competent authorities of the country or region where
the applicant is domiciled;

(3) the foreign applicant’s articles of association and its
annual reports for the last three years prior to submission of the
application;

(4) in the case of applying for establishing a joint venture
insurance company, relevant materials of the Chinese applicant
(s);

(5) the feasibility study report and the preparatory plan of the
proposed company;

(6) the names, biographical information and qualification
certifications of the personnel responsible for the preparatory
work of the proposed company; and

(7) other materials to be submitted as provided by CIRC.

Article 10 CIRC shall conduct a preliminary
examination on the application for establishing a foreign-funded
insurance company and decide to accept or reject it within 6 months
from the date of receipt of the complete application documents. If
the application is accepted, CIRC shall issue an official
application form to the applicant; if the application is rejected,
CIRC shall inform the applicant in writing and give reasons for the
rejection.

Article 11 Applicants shall complete the
preparatory work within 1 year from the date of receipt of the
official application form. An extension of 3 months may be granted
upon the approval of CIRC where the preparatory work is not
completed within the specified time limit for proper reasons. If
the preparatory work is not completed within the extended period,
the acceptance decision made by CIRC automatically ceases to be
effective. Upon completion of the preparatory work, the applicant
shall submit to CIRC the completed application form together with
the following materials for examination and approval:

(1) a report on the preparatory work;

(2) the articles of association of the proposed company;

(3) a list of the investors of the proposed company and the
amount of their respective contributions;

(4) a capital verification certificate issued by a statutory
capital verification institution;

(5) letters of attorney issued to the principal responsible
persons of the proposed company;

(6) the names, biographical information and qualification
certifications of the senior management personnel of the proposed
company;

(7) the business plan and reinsurance program of the proposed
company for the first 3 years to come;

(8) insurance clauses, premium rates and the calculation
statements of the liability reserves for the insurance products to
be distributed within the territory of China;

(9) information on the business premises and other facilities
related to the business operation of the proposed company;

(10) in the case of applying for establishing a branch of a
foreign insurance company, a bond issued by the headquarter company
guaranteeing the taxes and debts obligation of the proposed
branch;

(11) in the case of applying for establishing a joint venture
insurance company, the joint venture agreement; and

(12) other materials to be submitted as provided by CIRC.

Article 12 CIRC shall, within 60 days from the
date of receipt of the complete official application documents,
decide to approve or disapprove the application. If the application
is approved, CIRC shall issue a permit to carry on insurance
business; if the application is disapproved, CIRC shall inform the
applicant in writing and give the reasons for the disapproval.

Where the establishment of a foreign-funded insurance company is
approved, the applicant shall, on strength of the permit to carry
on insurance business, register with the administrative department
for industry and commerce and obtain a business license.

Article 13 Upon the establishment of a
foreign-funded insurance company, 20% of the total amount of its
registered capital or operating fund shall be deposited with the
bank(s) designated by CIRC as a guarantee fund. This guarantee fund
shall not be used except for paying off debts when the
foreign-funded insurance company is liquidated.

Article 14 Branching of a foreign-funded
insurance company within the territory of China shall be examined
and approved by CIRC in accordance with relevant provisions.

Chapter III Business Scope

Article 15 Foreign-funded insurance companies
may, within the business scope approved by CIRC and in accordance
with law, conduct all or part of the following classes of insurance
business:

(1) property insurance, including property loss or damage
insurance, liability insurance, credit insurance etc., or

(2) insurance of the person, including life assurance, health
insurance, accidental injury insurance etc.

Foreign-funded insurance companies may, upon the approval of
CIRC in accordance with relevant provisions, engage in large-scale
commercial risks insurance and master policy insurance within the
scope approved.

Article 16 A
foreign-funded insurance company shall not engage in both property
insurance and insurance of the person
concurrently.

Article 17 A
foreign-funded insurance company may conduct the following
reinsurance business with respect to the insurance business
provided for in Article 15 of these
Regulations:

(1) outward reinsurance; and

(2) inward reinsurance.

Article 18 The specific business scope,
geographic restriction of business and types of clients of a
foreign-funded insurance company shall be approved by CIRC in
accordance with relevant provisions. A foreign-funded insurance
company may only conduct its business within the scope of
approval.

Chapter IV Supervision and Administration

Article 19 CIRC has the right to inspect the
business performance, financial status and the utilization of funds
of a foreign-funded insurance company, to require a foreign-funded
insurance company to furnish relevant documents, materials and
written report (s) within a specified time limit, and to impose
penalties or make other dispositions according to law on any
violation of laws or rules.

Foreign-funded insurance companies shall accept the supervision
and inspection conducted by CIRC according to law, and truthfully
provide relevant documents, materials and written report (s).
Refusal, hindrance or concealment is prohibited.

Article 20 Foreign-funded insurance companies
shall not engage in any of the following transactions with their
associated enterprises unless is otherwise approved by CIRC:

(1) outward or inward reinsurance; or

(2) purchase or sale of assets, or other transactions.

The term of “associated enterprises”, as used in the preceding
paragraph, refers to any enterprise that has one of the following
associations with the foreign-funded insurance company:

(1) relationships of control in shareholding or capital
contribution;

(2) being controlled by a third party together with the
foreign-funded insurance company in shareholding or capital
contribution; or

(3) other association in interests.

Article 21 A branch of
a foreign insurance company shall, within 3 months after the end of
each fiscal year, submit to CIRC the financial statements of both
the branch and the headquarter company of the previous year and
make them public.

Article 22 A branch of
a foreign insurance company shall, where the headquarter company of
which falls under one of the following circumstances, submit to
CIRC a written report on relevant information within 10 days from
the date of occurrence of such circumstance(s):

(1) change of its name, the principal responsible persons or the
place of registration;

(2) change in the amount of its capital;

(3) change of shareholder(s) holding 10% or more of its total
capital or total shares;

(4) adjustment of its business scope;

(5) penalized by the relevant competent authorities of the
country or region where it is domiciled;

(6) significant losses incurred;

(7) separation, merger, dissolution, mandatory closure or being
declared bankrupt; or

(8) other circumstances provided for by CIRC.

Article 23 CIRC shall order a branch of a
foreign insurance company to cease to conduct new business where
its headquarter company is dissolved, closed according to law, or
declared bankrupt.

Article 24 A
foreign-funded insurance company, when engaging in insurance in
foreign currencies, shall abide by the relevant provisions of the
State on administration of foreign exchange.

Any foreign-funded insurance company conducting insurance
business within the territory of China, other than those otherwise
approved by the foreign exchange administration organ of the State,
shall use RMB in price quotations and in settlements.

Article 25 All documents, materials and written
reports submitted to CIRC in accordance with these Regulations
shall be written in the Chinese language.

Chapter V Termination and Liquidation

Article 26 A
foreign-funded insurance company may, upon the approval of CIRC, be
dissolved in the event of division, merger or the occurrence of
other dissolution circumstances set forth in the articles of
association of the company. When a foreign-funded insurance company
is dissolved, a liquidation task force shall be established
according to law to conduct the liquidation.

A foreign-funded insurance company engaging in life assurance
shall not be dissolved, except in the event of separation or
merger.

Article 27 Where the permit to carry on
insurance business of a foreign-funded insurance company is revoked
by CIRC due to its violation of laws or administrative regulations,
the company shall be closed according to law. CIRC shall timely
establish a liquidation task force to conduct the liquidation.

Article 28 Where a foreign-funded insurance
company is liquidated due to dissolution or closure, it shall,
within 60 days from the date of establishment of the liquidation
task force, make public announcements in the newspaper for at least
three times. The content of such public announcement shall be
approved by CIRC.

Article 29 Where a foreign-funded insurance
company is unable to pay off its debts when due, it may, upon the
approval of CIRC, be declared bankrupt by a people’s court. The
people’s court shall organize relevant departments such as CIRC and
relevant persons to establish a liquidation task force to conduct
the liquidation.

Article 30 Where a foreign-funded insurance
company is dissolved, closed according to law, or declared
bankrupt, it shall not transfer its assets outside the territory of
China before paying off all the debts.

Chapter VI Legal Liability

Article 31 Those who, in violation of these
Regulations, establish a foreign-funded insurance company or
illegally engage in insurance activities shall be banned by CIRC
and be investigated for criminal liability in accordance with the
provisions of the Criminal Law on the crime of illegally
establishing financial institutions, the crime of illegal operation
or other crimes. Where such violation is not serious enough for
criminal punishment, CIRC shall confiscate the illegal income and
concurrently impose a fine of not less than one time nor more than
five times the illegal income, or a fine of not less than 200,000
yuan nor more than 1,000,000 yuan if there is no illegal income or
the illegal income is less than 200,000 yuan.

Article 32 Where a foreign-funded insurance
company, in violation of these Regulations, engages in insurance
activities exceeding the approved business scope, geographic
restriction or types of clients, it shall be investigated for
criminal liability in accordance with the provisions of the
Criminal Law on the crime of illegal operation or other crimes.
Where such violation is not serious enough for criminal punishment,
CIRC shall order the foreign-funded insurance company to make
corrections and to refund the premiums collected, confiscate the
illegal income, and concurrently impose a fine of not less than one
time nor more than five times the illegal income, or a fine of not
less than 100,000 yuan nor more than 500,000 yuan if there is no
illegal income or the illegal income is less than 100,000 yuan.
Where the foreign-funded insurance company fails to make
corrections within a specified time limit or causes serious
consequences, CIRC shall order the foreign-funded insurance company
to suspend its business operation within a specified time limit, or
revoke its permit to carry on insurance business.

Article 33 Where a foreign-funded insurance
company, in violation of these Regulations, conducts one of the
following activities, CIRC shall order it to make corrections in a
specified time limit and impose a fine of not less than 50,000 yuan
nor more than 300,000 yuan. If the circumstances are serious, CIRC
may order the foreign-funded insurance company to cease accepting
new business, or revoke its permit to carry on insurance
business:

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

(2) engaging in transactions with its associated enterprises in
violation of the provisions; or

(3) failing to replenish the registered capital or operating
fund as in accordance with provisions.

Article 34 Where a foreign-funded insurance
company, in violation of these Regulations, conducts one of the
following activities, CIRC shall order it to make corrections
within a specified time limit. If the foreign-funded insurance
company fails to make corrections within the specified time limit,
it shall be fined not less than 10,000 yuan nor more than
100,000:

(1) failing to submit relevant documents, materials or written
reports as in accordance with provisions; or

(2) failing to make public announcements as in accordance with
provisions.

Article 35 Where a foreign-funded insurance
company, in violation of these Regulations, conduct one of the
following activities, CIRC shall impose a fine of not less than100,
000 yuan nor more than 500,000 yuan:

(1) submitting falsified documents, materials or written
reports; or

(2) refusing or hindering supervision and inspection conducted
according to law.

Article 36 Where a foreign-funded insurance
company, in violation of these Regulations, transfers its assets
out of the territory of China, CIRC shall order it to transfer back
the assets and impose a fine of not less than 20% nor more than the
full amount of the assets so transferred.

Article 37 Where a foreign-funded insurance
company violates relevant Chinese laws, administrative regulations
or these Regulations, CIRC may disqualify the senior managerial
personnel of the company to serve in China for a specified period
of time up to their whole life.

Chapter VII Supplementary Provisions

Article 38 Where there are no provisions in
these Regulations on the matters concerning the supervision and
administration of foreign-funded insurance companies, the Insurance
Law of the People’s Republic of China, as well as other relevant
laws, administrative regulations and other relevant provisions of
the State apply.

Article 39 These Regulations are mutatis
mutandis applicable to the insurance companies established and
operated within the mainland by insurance companies of Hong Kong
Special Administrative Region, Macao Special Administrative Region
and Taiwan region.

Article 40 These Regulations shall be effective
as of February 1, 2002.

(State Council)