The interpretation and application of this article is a new provision in the newly revised Insurance Law. In order to strengthen the management of insurance companies' activities of establishing overseas insurance institutions, prevent risks and protect the interests of the insured, the China Insurance Regulatory Commission formulated and promulgated the Measures for the Administration of Insurance Companies' Establishment of Overseas Insurance Institutions (hereinafter referred to as the Measures) on March 3, 2006, which came into effect on September 3, 2006. The Measures regulate the behavior of insurance companies to set up overseas insurance institutions and non-operating institutions such as representative offices, liaison offices or offices. The so-called "establishment of overseas insurance institutions" refers to the establishment of overseas branches, overseas insurance companies and insurance intermediaries by insurance companies, and the acquisition of overseas insurance companies and insurance intermediaries. China CIRC shall supervise and manage the activities of insurance companies to set up overseas insurance institutions, representative offices, liaison offices, offices and other non-business institutions according to law. This article does not mention "establishing overseas insurance institutions", but only stipulates "establishing subsidiaries and branches". A subsidiary may be a non-insurance institution, but I think the Measures are still applicable to the situations specified in this article.
This article includes two meanings: the first meaning is that the establishment of subsidiaries and branches by insurance companies abroad shall be approved by the the State Council Insurance Regulatory Authority. According to the Administrative Measures for Insurance Companies to Establish Overseas Insurance Institutions (Order No.7 of the China Insurance Regulatory Commission [2006]), the term "establishing overseas insurance institutions" in the Measures refers to the following acts of insurance companies: (1) establishing overseas branches, overseas insurance companies and insurance intermediaries;
(2) Acquisition of overseas insurance companies and insurance intermediaries. An insurance company that establishes an overseas insurance institution shall meet the following conditions:
Having been in business for more than 2 years; Its total assets at the end of last year were not less than 5 billion yuan; At the end of last year, the foreign exchange funds were not less than150,000 USD or its equivalent in a freely convertible currency; The solvency margin conforms to the relevant provisions of the China Insurance Regulatory Commission; The internal control system and risk management system comply with the relevant provisions of the China Insurance Regulatory Commission; No record of being severely punished in the last 2 years; The financial supervision system of the country or region where the overseas insurance institution is to be established is perfect, and it maintains an effective supervision and cooperation relationship with the Chinese insurance supervision institution; Other conditions as prescribed by the CIRC of China. An insurance company applying for the establishment of overseas branches, overseas insurance companies and insurance intermediaries shall submit the following materials to the China CIRC: an application; A copy of the decision of the State Administration of Foreign Exchange to approve the source of foreign exchange funds; The company's financial statements and foreign currency balance sheets audited by an accounting firm in the previous year; A solvency report audited by an accounting firm in the previous year; Internal control system and risk management system; A description of the basic information of the overseas insurance institution to be established, including its name, domicile, articles of association, registered capital or working capital, shareholding structure and capital contribution, business scope, resume of the person in charge of the preparation and a copy of identification materials; Feasibility study report, market analysis report and preparation plan of the overseas insurance institution to be established; Where the laws of the place where the overseas insurance institution is to be established require the insurance company to bear joint and several liabilities for the overseas insurance institution established by it, relevant explanatory materials shall be submitted; Other materials required by China CIRC. Where an insurance company or insurance intermediary established by an insurance company abroad has other sponsors, it shall also submit the names of other sponsors, copies of share subscription agreements, business licenses and balance sheets audited by an accounting firm in the previous year. China CIRC shall examine the application for the establishment of overseas insurance institutions according to law, and make a decision of approval or disapproval within 20 days from the date of accepting the application. If it decides not to approve, it shall notify the applicant in writing and explain the reasons. An insurance company shall, within 20 days after the overseas insurance institution obtains a license or the acquisition transaction is completed, report the following information of the overseas insurance institution to the China Insurance Regulatory Commission in writing: a copy of the license; Name and domicile of the institution; the Articles of association of the company The organizational form, business scope, registered capital or working capital of the institution, and the amount and proportion of capital contribution of other shareholders or partners; Name and contact information of the person in charge of the institution; Other materials required by China CIRC.
The establishment of overseas branches, overseas insurance companies and insurance intermediaries by insurance companies abroad must be approved by the insurance supervision and administration institution. First, the insurance supervision and administration department should know about the establishment of overseas branches, overseas insurance companies and insurance intermediaries by insurance companies. Second, insurance companies applying for establishing branches, overseas insurance companies and insurance intermediaries abroad must have certificates issued by the relevant departments of the China Municipal Government. At the same time, the Measures also set strict regulations on the supervision and management of overseas insurance institutions. For example, an insurance company should conduct effective risk management on its overseas insurance institutions, and urge such institutions to establish and improve the risk management system in accordance with the laws of the host country and the relevant regulations of the regulatory authorities. An insurance company shall strictly control the overseas insurance institutions it establishes to provide external guarantees. If an overseas branch of an insurance company really needs to provide external guarantee, it shall obtain the credit certificate of the insured and sign a legally binding counter-guarantee agreement. Where a counter-guarantee agreement is provided by way of property mortgage or pledge, the amount of guarantee provided shall not exceed 60% of the revalued value of the mortgaged or pledged property. Branches established overseas by insurance companies may not lend money overseas except for loans pledged by insurance policies.
The second layer means that an insurance company must obtain the approval of the the State Council Insurance Regulatory Authority to set up a representative office overseas. The representative office of an insurance company is an institution established by an insurance company to engage in indirect insurance business activities. The function of the representative office is to investigate and collect information, provide local insurance information to insurance companies, and play the role of communication and liaison between insurance companies and local areas. Insurance companies generally set up representative offices in areas where there are no branches. The representative offices will find out the situation and lay a good foundation, and then set up branches to carry out insurance business when conditions are ripe. Representative offices and branches are both agencies of insurance companies, but they are different in nature. Branches are institutions that directly engage in business activities, register according to law, obtain unincorporated business licenses, and carry out insurance business within the approved business scope. However, the representative office can only engage in indirect business activities and obtain a registration certificate, and cannot directly carry out insurance business, and its scale is smaller than that of branches. Where an insurance company establishes representative offices, liaison offices and other non-business institutions overseas, the provisions of the Measures for the Administration of Insurance Companies Establishing Overseas Insurance Institutions (Order No.7 of the CIRC [2006]) shall also apply. According to this method, if an insurance company establishes a representative office, liaison office and other non-business institutions overseas, it shall meet the following conditions: it has a legitimate source of foreign exchange funds; The internal control system and risk management system comply with the relevant provisions of the China Insurance Regulatory Commission; No record of being severely punished in the last 2 years;
Other conditions as prescribed by the CIRC of China.
An insurance company applying for establishing a representative office, liaison office or other non-business institution abroad shall submit the following documents to the China Insurance Regulatory Commission: an application; A brief description of the non-business organization such as the overseas representative office, liaison office or office to be established, including the name, domicile, operating budget, resume of the person in charge and a copy of identification materials; Other materials required by China CIRC. This article stipulates that the establishment of a representative office of an insurance company abroad must be approved by the insurance regulatory agency, which reflects the strict supervision of the insurance industry by the state. Although the representative office is not directly engaged in insurance business, its activities are closely related to insurance business. The insurance supervision and management department needs to grasp the establishment of the representative office as a whole in order to supervise its daily activities.