China Insurance Regulatory Commission (CIRC) recently released a draft of administrative rules on insurance company’s controlling shareholder and actual controller.
The draft asks an insurer should not buy its controlling shareholder or actual controller’s bonds nor commission them to make investment. The controlling shareholder and actual controller should not introduce investment from the insurer.
When an insurer together with its controlling shareholder and actual controller undertake a transaction with third party, the controlling shareholder and actual controller cannot erode the transaction opportunity or saddle the insurer with covert burden.
Bonds remain to be major investment instruments of insurance companies, which accounted for over half of insurers’ investment between 2009 and 2010. In the first quarter of 2011, insurance funds’ investment in bonds amounted to CNY 2.34 trillion, covering 46.7% of their total investment.
But the draft will not bring much impact to insurers’ bond investment, said analysts, as controlling shareholders and actual controllers of insurers have issued not that many bonds.
The draft also says controlling shareholder or actual controller of an insurer should make commitment to CIRC that will coordinate other shareholders or take effective measures to replenish the insurer’s capital in case of insolvency or CIRC’s proposal for capital increase on prudential supervision concern.
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