CBIRC Issues Measures on Related Party Transactions for Insurers
CBIRC issued administrative measures on related party transactions of insurance companies. These measures shall come into force as of the date of promulgation. CBIRC also issued questions and answers (Q&As) on these administrative measures. These measures aim to regulate the related party transactions of insurance companies, prevent the risks of connected transactions, safeguard the independence of insurance companies, and the interests of insurance consumers. The measures have been formulated in accordance with the relevant provisions of the Company Law of the People's Republic of China and the Insurance Law of the People's Republic of China.
Under these measures, the related transactions of an insurance company are classified into significant related party transactions and general related party transactions. Significant related party transactions refer to transactions in which the single or annual cumulative transaction amount between the insurance company or its holding subsidiaries and a related party reaches more than CNY 30 million and accounts for more than 1% of the audited net assets of the insurance company at the end of the previous year. General related party transactions refer to related party transactions other than material related party transactions. The key points covered in the administrative measures include the following:
- To improve the related party recognized standards. The measures draw on the international and domestic accounting standards and the actual situation of the supervision of related transactions of insurance companies in China, and reasonably defines the criteria for the identification of related parties.
- To develop regulatory indicators. The measures will help to further improve the proportion of supervision of fund-use related transactions, establish a proportional cap, and control the overall risk of connected transactions.
- To improve internal control and accountability mechanisms. The insurance company is required to set up the Board of Directors' Related Party Transaction Control Committee and the Related Party Transaction Management Office, which will be responsible for the comprehensive and daily management of the connected transactions, optimize the management process, and improve the internal control mechanism.
- To strengthen information disclosure. The Board of Directors' Related Party Transaction Control Committee will coordinate the management of information disclosure to ensure the authenticity, accuracy, and completeness of the information. Insurance companies are required to disclose not only related party transactions in accordance with accounting standards in the annual report, but also to disclose the overall situation of connected transactions in the current year, in accordance with regulatory requirements.
- To strengthen the regulatory function. The measures set up a special section to clarify the related transaction management and supervision duties, requiring the insurance company shareholders, directors, supervisors, senior management personnel, and other related parties to truthfully disclose the relevant information of the relationship, without concealing information or providing false statements.
Related Links (in Chinese)
Effective Date: September 09, 2019
Keywords: Asia Pacific, China, Insurance, Reinsurance, Proportionality, Related Party Transactions, CBIRC
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