The General Office of the China Banking and Insurance Regulatory Commission ("CBIRC") has recently issued the Circular on Matters Concerning Further Regulating Health Security Entrusted Management Services (the "Circular").
The Circular, a revision of the Circular on Issues concerning Health Security Entrusted Management Services promulgated by the former China Insurance Regulatory Commission ("CIRC") in 2008, reorganizes the regulatory framework for health security entrusted management services to center on basic business, improve regulatory weakness and guard against potential risks. Major contents include: 1. clarifying the conditions to offer such services and enriching the scope of entrusted matters; 2. focusing on the basic business and canceling product record-filing; 3. canceling the function of entrusted investment and regulating management fees; and 4. enhancing business regulation and preventing potential risks. Among others, the Circular bans insurance companies from packaging health security entrust management services as wealth management business to guarantee in various forms the appreciation of entrusted funds, and also requires that the management fees charged by an insurance company shall cover all costs incurred by the entrusted management services and may vary with the actual management costs, adding that the methods for such variation should be clarified in the entrusted management contract.