CBIRC Targets Affiliate Transactions in Insurance Sector, Use of Insurers as “ATM’s”

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The China Banking and Insurance Regulatory Commission (CBIRC) is cracking down on illicit affiliate transactions within the Chinese insurance sector.

On 9 September CBIRC issued the “Insurance Company Affiliate Transaction Regulatory Measures” (保险公司关联交易管理办法), for the purpose of “strengthening regulation of affiliate transactions between insurance companies, and strengthening internal control and management of insurance companies.”

A CBIRC official said that affiliate transactions in breach of regulations for the purpose of transferring rights and interests had become a key problem for the Chinese insurance sector in recent years.

“Individual insurance companies have established non-financial subsidiary companies or multi-layered nested financial products in order to transfer interests to affiliated parties, transforming insurance companies into ‘ATM’s,’ and triggering major risk.

“The ‘Insurance Company Affiliate Transaction Provisional Administrative Measures’ (保险公司关联交易管理暂行办法) released over ten years ago are unable to adjust to the demands of risk prevention and stronger regulation.”

The new Measures will clarify standards for major affiliate transactions, as well as set ratios for funds in affiliate transactions in order to contain overall risk.

Insurance companies will be required to better track and control insurance funds, as well as establish an affiliate transaction control committee and affiliate transaction management office under the board of directors, to be responsible for the comprehensive, daily management of affiliate transactions.

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