Interim Administrative Measures for the Use of Insurance Funds (Revised in 2014)

Interim Administrative Measures for the Use of Insurance Funds (Revised in 2014)

Interim Administrative Measures for the Use of Insurance Funds (Revised in 2014)

Order of the China Insurance Regulatory Commission [2014] No.3

April 4, 2014

(Promulgated on July 30, 2010 under the Order of the China Insurance Regulatory Commission [2010] No.9 and revised on April 4, 2014 in accordance with the Order of the China Insurance Regulatory Commission [2014] No.3, Decision of the China Insurance Regulatory Commission on the Revision to the Interim Administrative Measures for the Use of Insurance Funds)

Chapter I General Provisions

Article 1 In order to regulate the use of insurance funds, guard against the risks relating to the use of insurance funds, protect the lawful rights and interests of the insured parties, and promote the continuous and healthy development of the insurance industry, the Interim Administrative Measures for the Use of Insurance Funds (hereinafter referred to as the "Measures") are hereby formulated in accordance with the Insurance Law of the People's Republic of China (hereinafter referred to as the "Insurance Law") and other laws and administrative regulations.

Article 2 The Measures shall apply to insurance group (holding) companies and insurance companies lawfully established within the territory of China and engaging in activities related to the use of insurance funds.

Article 3 For the purpose of the Measures, the term "insurance funds" refers to the capital, provident funds, undistributed profits, various reserves and other funds of insurance group (holding) companies and insurance companies denoted in domestic and foreign currencies.

Article 4 The use of insurance funds must be sound, in compliance with the principle of safety and in conformity with the regulatory requirements of solvency, and the asset-liability management and the full risk management shall be adopted subject to the nature of the insurance funds in order to realize intensification, professionalism, standardization and marketization.

Article 5 The China Insurance Regulatory Commission (hereinafter referred to as the "CIRC") shall exercise supervision and administration over the activities related to the use of insurance funds in accordance with the law.

Chapter II Forms for the Use of Funds

Section 1 Scope of the Use of Funds

Article 6 The use of insurance funds shall be limited to the following forms:
1. bank deposits;
2. trade in negotiable securities such as bonds, shares and securities investment fund shares;
3. investment in immoveable property; and
4. other forms of the use of funds prescribed by the State Council.
Where insurance funds are used for overseas investment, the regulatory provisions of the CIRC shall apply.

Article 7 Where insurance funds are used for bank deposits, the deposit bank shall be a commercial bank that fulfills the following conditions:
1. the capital adequacy ratio, the net assets and the provision coverage conform to the regulatory requirements;
2. standardized governance structure, sound internal control system and good business performance;
3. no substantial act in violation of laws and regulations in the recent three years; and
4. higher credit rating than the investment level for three consecutive years.

Article 8 The bonds invested with the insurance funds shall reach the credit rating level assessed by a credit rating institution recognized by the CIRC and in compliance with the requirements of provisions, which mainly include government bonds, financial bonds, enterprise (corporate) bonds, non-financial enterprise debt financing instruments and other bonds that meet the requirements.

Article 9 The shares invested with the insurance funds shall mainly include those publicly offered and listed for trade and those privately offered to specific targets by listed companies.
The investment in the shares of listed companies in the Growth Enterprise Board and the shares subscribed and traded in foreign currencies shall be separately provided by the CIRC.

Article 10 Where insurance funds are invested in securities investment funds, the fund manager shall satisfy the following conditions:
1. good corporate governance with the net assets of more than CNY100 million for three consecutive years;
2. performing the contract according to the law, protecting the legitimate rights and interests of investors and no bad records in the recent three years;
3. establishing an effective firewall system for the securities investment funds and the business of specific customer asset management; and
4. a stable investment team with good historical investment records, and a relatively stable asset management scale or fund shares.

Article 11 The immovable property invested with the insurance funds refers to land, buildings and other fixtures attached to the land. The specific measures shall otherwise be provided by the CIRC.

Article 12 The equity invested with the insurance funds shall be the equity of a company limited by shares and that of a limited liability company, which has been established and registered within the territory according to the law and not publicly listed on the stock exchanges.

Article 13 Neither the insurance group (holding) company nor insurance company may use various reserves to purchase immovable property for self-use or engage in equity investment to achieve control over other enterprises.

Article 14 Where an insurance group (holding) company or insurance company makes equity investment to achieve control over other enterprises, it shall satisfy the regulatory requirements on solvency. Where the subsidiary of the insurance group (holding) company fails to meet the regulatory requirements of the CIRC on solvency, the said company shall not invest in non-insurance financial enterprises.
Equity investment to acquire control over other enterprises shall be conducted by the following enterprises only:
1. insurance enterprises, including insurance companies, insurance asset management institutions and professional insurance agencies and insurance brokerage institutions;
2. non-insurance financial enterprises; and
3. enterprises engaging in insurance-related business.

Article 15 An insurance group (holding) company or insurance company engaging in the use of insurance funds, may not conduct the following acts:
1. deposit into non-banking financial institutions;
2. purchase of shares under "special treatment" or "special treatment of delisting risk warning" by stock exchanges;
3. investment in enterprise equity and immovable property without stable returns expectation on cash flow or added value of assets or with high pollution, which is not in compliance with the state industrial policy projects;
4.
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