Foreign insurance companies that either operate in China or intend to build a presence in the promising market will have to follow detailed rules starting from next month.

Industry watchdog, the China Insurance Regulatory Commission (CIRC), recently issued detailed rules for the Regulatory Provisions of Foreign-funded Insurance Companies, which will take effect on June 15.

Foreign-funded insurance companies refers to wholly owned foreign insurance companies and Sino-foreign insurance joint ventures.

According to China's World Trade Organization (WTO) commitments, foreign insurance companies will be allowed to have a share of 50 per cent or less in joint venture life insurance companies.

The provisions were promulgated in 2002. But the detailed rules address practical issues that were not covered by the provisions.

The issues include requirements and application procedures for foreign insurers' opening new branches, rules on foreign insurers' disbanding, liquidating and closure.

The rules, which are strictly in accordance with China's WTO commitments, provide legal assurance for the implementation of the commitments concerning the insurance industry, said a spokesperson for the commission.

The detailed rules will also help enhance the transparency and the effectiveness of the provisions, the spokesperson said.

The rules stipulate that foreign-funded insurers operating in China need to have no less than 200 million yuan (US$24 million) in registered capital or operational capital. Those that have not met this requirement should do so within two years after the rules come into force.

The rules also clarify regulators' obligations. After receiving foreign-funded insurers' application packages for establishing branches, the CIRC should decide whether or not to approve them within 20 days. And reasons should be provided if the application is turned down.

By the end of April, 38 foreign-funded underwriters have started operations in China. They have set up 65 operational branches in the country.

Source: China Daily