To adapt to the new situations of its financial opening up, China will make amendments to its Regulations on Administration of Foreign-funded Insurance Companies, as reported in the Shanghai Securities News on Wednesday.
These amendments include three aspects: increase the upper limit of the proportion of foreign shareholding in joint-equity life insurance companies, lower the barriers of the establishment of a joint-ventured and wholly-owned subsidiaries of insurance companies, and standardize the alteration of investors' equity in foreign-funded insurance companies.
The upper limit of the proportion of foreign shareholding in joint-equity life insurance companies will rise from 50 percent to 51 percent, which is the most important amendment. This 1 percent means that foreign investors will hold more control in making decisions in these joint-equity life insurance companies.
According to the previous regulations, joint-ventured and wholly-owned insurance companies should at least hold RMB 200 million registered capital. These insurance companies should increase the registered capital by RMB 20 million to establish their first subsidiary.
However, the new amendments might remove these previous regulations since recently most joint-ventured and wholly-owned insurance companies hold a registered capital of over RMB 500 million.
The maven states that the preliminary suggestion to the amendments is that a foreign-funded insurance company should have at least one insurance company with healthy operations as the major shareholder. If the investor's equities have changed, the company should make sure it has at least one healthily operating insurance company as the major shareholder after the change. The major shareholder of a foreign-funded insurance company cannot transfer its equity within five years from the date of acquiring its stake in a particular company.
The major shareholder mentioned before means the shareholder who holds over 50 percent of the foreign-funded insurance company's total equity, or who does not hold over 50 percent of the total equity but has a large control of the company's operations and administration.
These amendments will help foreign-funded insurance companies to further develop in China. Since the application process of establishing a subsidiary will be simplified, foreign investments in insurance companies will increase in China.