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
Previous Article
ECB Issues Legal Acts on Targeted Longer-Term Refinancing OperationsRelated Articles
EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
FSB Sets Out Work Priorities for 2021
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU Publishes Corrigendum to Revised Capital Requirements Regulation
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs Issue Statement on Application of Sustainability Disclosures Rule
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC Consults on Crisis Management and Deposit Insurance Frameworks
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA Proposes Standards for Supervisory Cooperation Under IFD
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE Addresses Banks in Scope of First Resolvability Assessment
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.
