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16 July 2019
For foreign investors with an eye on the Chinese insurance market, obtaining an insurance intermediary licence is a good idea. However, compared with insurance brokerage licences, insurance agency licences are difficult for foreign investors to obtain. The China Banking and Insurance Regulatory Commission (CBIRC) has classified companies with a total foreign shareholding ratio of more than 25% as foreign-invested insurers. Therefore, foreign investors that wish to acquire control over a Chinese insurer should consider either setting up a new foreign-invested insurer or acquiring an existing foreign-invested insurer.
The opening up of the Chinese insurance market has been accelerated over the past two years. On 19 June 2018, in order to promote the development of the Chinese insurance industry, the CBIRC issued a notice allowing foreign investors to undertake insurance business in China. The notice sets out that:
In addition, mainland China has entered into several special arrangements with Hong Kong and Macao in order to enhance its economic partnerships. These arrangements have introduced the following exceptions for Hong Kong and Macao entities:
Although the abovementioned foreign investors can theoretically establish or invest in foreign-invested insurers, preliminary research suggests that only one foreign-invested insurer currently operates on the market (Zhongsheng (Tianjin) Insurance Sales Co, Ltd). Further, the CBIRC has issued no new licences to insurers (including domestic and foreign-invested insurers) since 11 July 2018. It appears that the CBIRC's control over foreign-invested insurers remains stringent, and that obtaining authorisation to establish a foreign-invested insurer is still difficult. At present, only one target company option would prevent foreign investors from having to develop an acquisition plan.
Where foreign investors acquire control over an existing domestic insurer, the domestic insurer will become a foreign-invested insurer where the foreign shareholding ratio exceeds 25%. In such circumstances, the qualification requirements and approval procedures are virtually the same as those which apply to the establishment of a new foreign-invested insurer (ie, the requirements for the acquisition of domestic insurers will not apply). The foreign investor will then have to meet the various qualification requirements discussed above.
Although the Chinese insurance market has been further opened up to foreign investors, it has yet to be fully liberalised and it remains difficult for foreign investors to establish new foreign-invested insurers. Acquiring control over an existing domestic insurer will also trigger the licensing procedure which applies to the establishment of foreign-invested insurers. It remains to be seen when the CBIRC will formally recommence the examination and approval procedure for new licences. However, following the introduction of the above measures to open up the market, this date is likely to be sooner rather than later.
For further information on this topic please contact Yu Dan or Dong Xin at AnJie Law Firm by telephone (+86 10 8567 5988) or email (email@example.com or firstname.lastname@example.org). The AnJie Law Firm website can be accessed at www.anjielaw.com.
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