Recently, three authorities, including the Ministry of Industry and Information Technology ("MIIT"), have jointly issued the Circular on Launching the Pilot Mechanism of Insurance Compensation for the Application of First Batch of Critical New Materials (the "Circular"). At the same time, the MIIT has issued the Catalog for the Demonstration Guidance to the Application of First Batch of Critical New Materials (2017 Edition) (the "Catalog") and the China Insurance Regulatory Commission ("CIRC") has issued the Guidelines for Launching Pilot Insurance for the Application of First Batch of Critical New Materials together with the list of insurance companies under the pilot program.
According to the Circular, the first year should be calculated starting from the time when a client purchases new materials for the first time before the Catalog has expired. Manufacturers producing first batch of new materials are the targets subsidized under the insurance compensation policy. The liability quota under the mechanism of the first use of new materials should be determined comprehensively depending on the value of the procurement contract and the amount of likely liability losses caused by such new products. The liability quota subsidized by the government should be no more than five times of the contract value in principle, equal to CNY500 million at the maximum, and the insurance premium rate should be up to three percent.