Name: Circular Concerning the Adjustment of Relevant Provisions of the Interim Measures on the Administration of Insurance Asset Management Companies (关于调整《保险资产管理公司管理暂行规定》有关规定的通知) (the “Circular”)
Issuing authority: China Insurance Regulatory Commission (“CIRC”)
Effective date: 7 April 2011
Subject: Insurance asset management companies
The CIRC has introduced changes to the rules regulating insurance asset management companies (“IAMCs”) with the intention of developing them from pure “insurance” asset management companies to comprehensive asset management platforms, introducing further competition within China’s asset management market.
The Circular amends the 2004 Interim Measures on the Administration of Insurance Asset Management Companies to expand the permitted business scope of IAMCs and, at the same time, raises the thresholds for establishing an IAMC.
The issue of the Circular, together with the CIRC’s approval at the end of 2010 of Sino Life’s establishment of an IAMC, suggest that there may shortly be a second wave of approvals for new IAMC in China. Since the first round of IAMC approvals in 2003 to 2006 when nine IAMCs and one insurance asset management centre were approved, the CIRC has effectively suspended further approvals of new IAMCs.
Highlights
Highlights of the key changes introduced include:
- Business scope
The permitted business scope of an insurance asset management company has been expanded from the management of insurance funds of affiliated insurance companies to include management of other types of funds, not just insurance funds, from third parties.
This expansion is an endorsement of existing market practice and should further encourage IAMCs to move towards comprehensive asset management platforms. Since 2007, IAMCs have in practice been providing asset management services, such as management of enterprise annuities, for third parties on a contractual basis. Some insurance companies have also obtained approval from the CIRC to create their own asset management products on a pilot basis.
- Establishment requirements
The thresholds for establishing an IAMC have been raised:
(i) the minimum total assets for the primary sponsor of a proposed IAMC are significantly increased. For example, where the sponsor is an insurance holding company, it must have minimum total assets of RMB15 billion (previously RMB10 billion). Where the sponsor is a property insurance company, the minimum level of total assets has been increased to RMB10 billion from RMB5 billion;
(ii) the primary sponsor’s solvency ratio must not be lower than 150% (previously 100%); and
(iii) the minimum registered capital of the proposed IAMC must not be lower than RMB100 million (previously RMB30 million).
Given the increased threshold, it will now be more difficult for small and medium size insurance companies or groups to establish their own asset management companies.
However, while there has been an increase in certain threshold requirements, the Circular lowers the track record requirement for the primary sponsor from eight years to five years, allowing relatively new market entrants to set up IAMCs.
- Subsidiaries
The Circular clarifies that IAMCs will be permitted to set up subsidiaries to engage in special purpose asset management. The detailed requirements for the establishment of a subsidiary, its specific business scope, and how it may support the business of an IAMC remain to be clarified.
If you would like to discuss anything regarding this Alert please contact Teresa Ma (Shanghai), Fang Jian (Shanghai), Nicola Mayo (Shanghai), Simon Poh (Shanghai), or Betty Yap (Hong Kong).
