As the administrative and regulatory authority of China’s commercial insurance, which is still in the primary stage of development, the CIRC considers the development of insurance industry as its most important task and strives to make China insurance industry big and strong. Concentrating on the theme of development, the CIRC not only makes effort to boost the industry, but also emphasizes risk prevention. Combining supervision and regulation with service providing, it strives to promote rapid, harmonious and healthy development of China insurance industry. The CIRC’s major regulatory measures since 2004 are as follows:

I.                   Measures to Boost the Industry

Adhering to the market-oriented principle, the CIRC has adopted a series of policies and measures to accelerate development and has made breakthroughs in tackling problems and removing shackles that hampered the development of insurance industry.

(1)    Improving the Market Access Mechanism

With the approvals to the establishment of the first agricultural insurance company, the first health insurance company, the first pension insurance company and the first agricultural insurance mutual company, insurance companies in China are becoming more and more specialized and the organizational forms for insurance operation are more varied. In 2004, 8 Chinese-invested insurance companies and 4 foreign-invested insurance companies entered the market. At the same time, the CIRC has improved the market access mechanism for insurance branches to encourage law-abiding insurance companies with sound internal control system and adequate solvency to establish branches so as to increase market competition.

(2)    Broadening Insurance Fund Management Channels

 To implement Several Opinions of the State Council on Promoting Opening-up and Stable Development of Capital Market, the CIRC has permitted direct investment of insurance funds in the stock market, allowed foreign-exchange insurance funds to be invested overseas, allowed insurance companies to invest in subordinated debts issued by banks and convertible corporate bonds, and permitted foreign-invested insurance companies to enter into deposit agreement with banks. The broadening of insurance fund management channels helps insurance companies to improve the matching of assets and liabilities, to spread investment risks and to raise investment returns.

(3) Increasing Financing Channels of Insurance Companies

The CIRC has permitted insurance companies to issue subordinated debts, which provided a new financing channel for the fast-developing insurance industry and helped the insurance companies to improve their solvency status.

(4) Pushing forward Reform of Administrative Examination and Approval System

The CIRC promulgated Implementation Measures on Administrative Licensing of the CIRC in 2004, which specified standardized and transparent insurance administrative licensing procedures. The CIRC has cancelled three batches of items for administrative examination and approval. Altogether, 108 items have been cancelled including the 22 items in the third batch. Besides, CIRC has reformed the management system of insurance clauses and premium rates. The clauses and premium rates of some products now only need to be filed with the CIRC instead of being approved by the CIRC. Insurance companies can adjust their auto insurance premium rates in the light of different risk elements and establish a market-oriented pricing mechanism. Simplification of life insurance clauses has also been pushed forward to make insurance products easier to understand by the public.

II.  Measures to Strengthen Risk Prevention

The CIRC considers risk prevention as a project of systematic engineering and tries to build 5 lines of defense against risks, namely, internal control as the basis, supervision of solvency adequacy as the core, on-site inspection as an important means, fund management regulation as a key link and insurance security fund as a protective screen.

(1) Strengthening Internal Management

The CIRC has promulgated Guidance on Informationalization Inspection of Insurance Organizations Before Business Commencement and specified requirements for the Informationalization of insurance companies. The CIRC has also promulgated Provisional Regulations on Management of Insurance Statistics, launched China Insurance Statistics Information System, and realized the network connection between the regulatory authority and insurance companies. These measures have strengthened the risk control and internal management of insurance companies.

(2) Strengthening Supervision of Solvency Adequacy

After the promulgation of Measures on Administration of Reserves for Non-life Insurance Business of Insurance Companies (Tentative), more prudential and standardized requirements for liabilities reserving have been implemented. The promulgation of Rules of Solvency Reporting of Insurance Companies made the solvency assessment of insurance companies more scientific and accurate. A quarterly solvency report system and a specialized financial analysis system have been established. Besides, the Regulatory Opinions issued to insolvent companies, asking them to rectify by the prescribed time made the supervision of solvency adequacy stronger and more effective.

(3) Reinforcing On-site Inspection

CIRC is more rigorous in punishing insurance companies and intermediaries that violate laws and regulations and has eliminated some of the risks that endanger the stability of the insurance market. “Underground policies” has been dealt with severely and stopped spreading. The liability insurance business for car loans has been standardized and relevant risks mitigated.

(4) Strengthening Supervision of Fund Management

A custody system for insurance funds has been adopted since the promulgation of Provisional Regulations on Administration of Insurance Asset Management Companies and Guidance on Risk Control in Insurance Fund Management.  The CIRC has been guiding insurance companies to improve their fund management risk control systems to deal with the latent risks after the opening up of insurance fund management channels. It has organized special inspections and many activities to warn insurance companies of relevant risks.

(5) Establishing and Improving Insurance Security Fund System