The China Insurance Regulatory Commission has issued new guidelines on information disclosure for mutual insurance companies, according to a statement from the regulator.
The new rules aim to strengthen transparency and operational management of mutual insurance companies for the public interest and long term development of this sector, said the CIRC. Internationally, there are relatively lower requirements for information disclosure on mutual insurers. In enhancing this sector’s corporate governance, the CIRC said it has expanded the scope of disclosure requirements for the management.
China introduced mutual insurance to promote the development of a multiple-layer market as part of the supplyside reform of insurance industry. Last year, the CIRC said it approved the establishment of three mutual insurance companies as the first step to explore into the development of this sector.
Mutual insurance is a new concept in China, with distinctive variation to traditional insurance companies in terms of business model, operation, management, structure and risk management. Therefore, the CIRC said it has to raise the standards and transparency of this sector at this initial stage of development in China.
The CIRC said it is reviewing mutual insurance’s special business model and operation structure to formulate a regulatory framework and supervision guidelines for this sector. The rules will aim to protect policyholders’ interest and this sector’s sustainable development.
In February, the CIRC approved the launch of first mutual insurer, Zhonghui Property Mutual Insurance Co., which has an initial operation capital of 1 billion yuan (US$146 million) and it is registered in Shenzhen’s Qianhai area. The mutual insurer is allowed to operate credit, short-term medical and accident insurance, as well reinsurance for these businesses, asset management and other activities approved by the regulator (Best’s News Service, Feb. 16, 2017).
Last year, the CIRC granted approvals for the establishment of three mutual insurance companies focusing on credit insurance for small enterprises, construction insurance, and pension and health care insurance for a specific community. The other two mutual insurers are Huiyou Construction Property Mutual and Xinmei Life Mutual (Best’s News Service, June 23, 2016).
The CIRC issued guidelines on the supervision of mutual insurance organizations initially based on a regulatory pilot scheme in 2016. The regulator laid down three different formats of mutual insurance cooperatives — general, professional and regional mutual insurance organizations. Professional mutual cooperatives offer insurance for a single and specific risk while regional cooperatives operate in an area below the municipal level to provide insurance for that specific district’s residents.
This article was written by Iris Lai, Hong Kong bureau manager, A.M. Best and was published on 11 April 2017 on Best’s News Service. It is reproduced with the kind permission of A.M. Best, one of ICMIF’s Supporting Members.