2021.12.23 ZHANG, Yinuo (Norah)、CUI, Yongze
On December 10, 2021, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Administrative Regulations on Insurance Asset Management Companies(“IAMC”) (Consultation Draft) (“Regulations”) for public consultation. These are the new rules regarding organizational administration in an era of uniform regulations for asset management operations. Together with the other already implemented rules on Insurance Asset Management Products (IAMPs), the Regulations now form a unified regulatory regime for the insurance asset management industry. Below we have summarized the key provisions of the Regulations.
1. Improving the Rules on Shareholding Structures
The Regulations lift the restriction that domestic insurance companies shall hold stakes of no less than 75% and lower the requirement regarding minimum stakes held by insurance companies in an IAMC. As revised, there are no restrictions on maximum ownership held by a qualified foreign entity in an IAMC and the minimum stake of domestic and foreign insurance companies in an IAMC is reduced to 50%. This is a clear signal that the Regulations will encourage investors with sound backgrounds already engaged in insurance-related sectors to invest in IAMCs, and signals that foreign investors must be insurance groups, insurance companies or asset management institutions who satisfy the high qualification requirements and the rule of “Liang Can Yi Kong”. That is, unless otherwise approved by the CBIRC, the same investor, together with its affiliates and persons acting in concert, shall not invest in more than two IAMCs, nor directly, indirectly or jointly control more than one IAMC. From the above, we can see that the Regulations are trying to prudentially grant more chances to qualified foreign investors with strong competence to invest in China’s insurance asset management industry, subject to them assuring an IAMC to play a key role in managing the insurance funds.
2. Specifying Business Scope
The Regulations expressly specify the business scope of an IAMC, i.e., other than the management of insurance funds upon entrustment, an IAMC may also conduct IAMPs-related businesses and engage in the management of other medium- and long-term funds (such as pension funds, social security funds and enterprise annuities) and the funds invested by qualified investors upon entrustment, to encourage the diversified business operations of IAMCs. Furthermore, the Regulations clearly prohibit IAMCs from offering “channel” services and allows them to set up branches, which has been prohibited previously, to facilitate IAMCs to realize “the preserving and increasing of asset value in the long run”.
3. Reinforcing Risk Management and Corporate Governance
The Regulations propose comprehensive requirements for risk management systems, internal controls and auditing, the risk management of subsidiaries, the management of related-party transactions, the management of practitioners, risk reserve funds and emergency management. In particular, the Regulations require IAMCs to conduct both internal and external audits on the internal control of their asset management businesses at least once a year. The Regulations provide a whole chapter regarding "corporate governance", under which IAMCs shall establish a reasonable corporate governance structure that will enable proper oversight and work to solve conflicts of interest, to ensure the compliant operation of a company. Moreover, IAMCs shall ensure an efficient risk management mechanism and balance the needs of various stakeholders to better protect the legitimate rights and interests of investors.
The Regulations are oriented by a regulatory policy that IAMCs shall primarily make long-term and robust investments for the purpose of preserving or increasing asset value in the long run. The Regulations offer more opportunities to overseas insurance and asset management institutions with strong backgrounds in the asset management field to access China’s insurance asset management industry, on the condition that IAMCs will operate in a prudent, robust, and compliant manner.
We will continue to monitor the situation and keep our clients apprised of any important developments.
