China Insurance Regulatory Commission introduces registration system for reinsurers and reinsurance brokers
New rules of the CIRC published on 12 March 2015 introduce a new mandatory registration system from 1 January 2016 for all reinsurance companies and reinsurance brokers who deal with ceding companies in mainland China. The scope of the registration requirement covers foreign reinsurers which transact with a Chinese ceding party. PRC insurance companies will not be permitted to conduct reinsurance business with unregistered reinsurers or brokers. Moreover, the rules also impose disclosure requirements on registered institutions.
The key features of the new registration system are as follows:
- Peer recommendation: Before a foreign reinsurer or reinsurance broker can be registered with the system, a recommendation from an eligible insurance institution or broker which is already registered on CIRC’s system is required. Each recommendation is valid for three years. Upon the expiry of the three-year period, the foreign applicant may nominate the same onshore entity or a new entity to make the necessary recommendation.
- Qualifications: The rules stipulate various qualification standards that reinsurers and reinsurance brokers must meet in order to complete the registration. For example, a reinsurer should satisfy the following requirements (among others):
i. having a credit rating of an internationally recognised standard not lower than A- (or its equivalent);
ii. having an aggregate capital and reserve fund of RMB200 million (or its equivalent) or above; and
iii. not having engaged in any illegal activities in the two financial years prior to the commencement of the reinsurance contract.
- Disclosure: The rules also provide for the disclosure by market participants of certain corporate information on the register. For example, a reinsurance company will be required to submit audited annual financial reports for the past three years, information on top three shareholders, financial information of its reinsurance business as well as other information. In addition, disclosure needs to be made upon occurrence of certain events, e.g. commutation, merger or acquisition or any imposition of penalties by a regulatory authority for material violation of laws.
- Liability: Institutions submitting information must ensure the accuracy, truthfulness, completeness and timeliness of such information. Information disclosed will be available for inspection by PRC insurance institutions and reinsurance brokers that are registered, who also have the right to report the disclosure of false information.
- The rules also impose regulatory penalties on institutions which intentionally conceal information or disclose false information, or whose recommendations expire without renewal. Non-compliant institutions will be removed from the register and banned from participation in the reinsurance business in the PRC market for the next two to 10 years (depending on the seriousness of the non-compliance).
Notice of the China Insurance Regulatory Commission (“CIRC”) on the Implementation of Reinsurance Registration Administration (中国保监会关于实施再保险登记管理有关事项的通知), 5 March 2015