Recently, the China Insurance Regulatory Commission ("CIRC") has distributed the Circular on Further Intensifying the Acceptance Inspection Ahead of the Opening of Insurance Companies for Business (the "Circular"), with immediate effect.
The Circular tightens the acceptance inspection of the business commencement in four aspects, in a bid to prevent risks regarding a company's incomplete management and control, radical business operation, ineffective governance, false capital contribution, etc. Firstly, efforts will be made to strengthen the review of particulars on the implementation of the proposed construction planning and effectiveness of the articles of association. Where realities in respect of corporate governance, team of senior executives, business planning, etc. are radically different from details given in applications materials for the proposed insurance company, or gravely deviate from the regulatory orientation, the insurance company concerned will be ordered to make rectification within the required time limit. Secondly, more efforts will be made to penetrate shareholders' qualifications and review the authenticity of the capital contributed. Shareholders will be required to provide explanations and certifications to prove the source of their funds; and it is made clear that shareholders are not allowed to transfer directly or in a disguised manner their equities when preparation is ongoing to build the insurance company. The next is to introduce the interview-based assessment. The chairman of the board, general manager and senior executives to be appointed should sign and confirm contents of the interview assessment. The last is to improve the acceptance inspection criteria. How well a company's development planning, product investment, and corporate governance are put in place will be linked to the access of its branches.