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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II QUALIFICATION REQUIREMENTS CHAPTER III INVESTMENT SCOPE AND PROPORTION CHAPTER IV INVESTMENT MANAGEMENT CHAPTER V ASSET CUSTODY CHAPTER VI SUPERVISION AND MANAGEMENT CHAPTER VII SUPPLEMENTARY PROVISIONS CHAPTER I GENERAL PROVISIONS Article 1. These Measures are formulated in accordance with the Insurance Law of the People's Republic of China, Regulations of the People's Republic of China on Foreign Exchange Control and other relevant laws and regulations for the purpose of strengthening the control of overseas use of insurance-related funds, preventing risks and safeguarding the interests of the insured. Article 2. An insurance company mentioned in these Measures means a Chinese capital insurance company, foreign capital insurance company, Chinese-foreign joint venture insurance company or a branch of any foreign insurance company, set up with the approval of China Insurance Regulatory Commission (CIRC) and registered according to law in the People's Republic of China. The insurance-related foreign exchange fund mentioned in these Measures means the sum of capital, public reserve fund, undistributed profits, various reserves and guarantee deposits received in foreign currencies of an insurance company. Article 3. In the overseas use of its foreign exchange fund, the insurance company shall observe the principle of security, liquidity and profitability and be prudent in making investment and shall operate independently at its own risk. Article 4. In the overseas use of its foreign exchange fund, the insurance company shall comply with these Measures and other laws and regulations concerning insurance and foreign exchange control, as well as the relevant foreign laws and regulations. Article 5. CIRC and the State Administration of Foreign Exchange (SAFE) shall conduct supervision and control over the overseas use of insurance-related foreign exchange funds. CHAPTER II QUALIFICATION REQUIREMENTS Article 6. An insurance company undertaking overseas use of its foreign exchange fund shall meet the following requirements: (1) having a license for engaging in foreign exchange; (2) its total assets at the end of last year being not less than RMB5 billion yuan; (3) its foreign exchange fund at the end of last year being not less than US$15 million or its equivalent in other freely convertible currencies; (4) its solvency margin conforming to the relevant provisions of CIRC; (5) having a professional fund use department or a related insurance asset management company; (6) its internal management system and risk control system conforming to the provisions of the Guidelines for Risk Control in the Use of Insurance Funds; (7) the number of its professional and managerial personnel with at least two years of experience in overseas investment conforming to the relevant provisions; and (8) other requirements that may be provided by CIRC and SAFE. Article 7. For the overseas use of its foreign exchange fund, the insurance company shall, within the amount of its foreign exchange balance at the end of last year, apply to SAFE for foreign exchange remittance and payment for investment outside China by submitting the following documents and materials in triplicate: (1) a written application containing at least the particulars of the applicant, the amount of foreign exchange applied for to be paid for investment and the investment plan; (2) its financial statements and balance sheet in foreign currencies of last year audited by an accounting firm; (3) reports on its solvency positions at the end of last year and at the end of last quarter audited by an accounting firm and notes to such reports; (4) a brief of its internal professional fund use department or of related insurance asset management company; (5) its internal management system and risk control system; (6) CVs of its professionals engaging in overseas investment; (7) materials relating to its domestic custodian and the draft custody agreement; (8) materials relating to its external trustee and the draft asset management entrustment agreement, if it has an external trustee; and (9) other materials that may be required by CIRC and SAFE. The SAFE shall make a decision as whether or not to approve the application within 20 days from the receipt of all necessary application documents. In the case of approval, the amount of foreign exchange payment for investment approved shall be notified in writing to the applicant; in the case of disapproval, such disapproval shall be notified in writing to the applicant with reasons indicated. A copy of such decision for either approval or disapproval shall also be sent to CIRC. Article 8. Where its foreign exchange fund increases due to its capital increase or shares expansion or overseas listing, the insurance company may apply to the SAFE for an increase of the specified amount of foreign exchange payment for investment for the current year by submitting to the SAFE the relevant documents and materials. The SAFE shall make a decision in accordance with Article 7 of these Measures. CHAPTER III INVESTMENT SCOPE AND PROPORTION Article 9. The overseas use of insurance-related foreign exchange funds shall be limited to the following investment types and instruments: (1) bank deposit; (2) bond of a foreign government, international financial organization or foreign company; (3) bond issued outside China by the Chinese government or a Chinese enterprise; (4) money market derivatives, such as bank's bills and large negotiable certificates of deposit; and (5) other investment types and instruments within the scope specified by the State Council. The "bank" referred to in item (1) of the preceding paragraph means either an external branch of a Chinese capital commercial bank or a foreign bank with at least A grade or its equivalent of long-term credit assessed by an internationally accepted rating agency for the past three years. The "bond" referred to in item (2) of the preceding paragraph means that of at least A grade or its equivalent assessed by an internationally accepted rating agency. The "money market derivatives" referred to in item (4) of the preceding paragraph mean money market fixed income derivatives of at least AAA grade or its equivalent assessed by an internationally accepted rating agency. Article 10. Any overseas use of insurance-related foreign exchange fund shall comply with the proportions as follows: (1) the total amount of the insurance company that may be used in investment may not exceed 80% of its foreign exchange balance at the end of last year or, in the case of any circumstances under Article 8 herein, it may not exceed 80% of the sum of its foreign exchange balance at the end of last year and the increased fund; (2) the actual total amount of investment of the insurance company may not exceed the amount of foreign exchange payment for investment approved by the SAFE; (3) the insurance company's deposit in one bank may not exceed 30% of the amount of foreign exchange payment for investment approved by the SAFE, however the balance in the account for settlement of overseas use of foreign exchange fund shall not be subject to this limit; (4) the balance of all bonds of A grade of credit that the insurance company invested in, except those issued overseas by the Chinese government or a Chinese enterprise, calculated at their cost prices, may not exceed 30% of the amount of foreign exchange payment for investment approved by the SAFE; (5) the balance of all bonds below AA grade of credit that the insurance company invested in, except those issued overseas by the Chinese government or a Chinese enterprise, calculated at their cost prices, may not exceed 70% of the amount of foreign exchange payment for investment approved by the SAFE; (6) the balance of bonds issued by one company or enterprise, which the insurance company invested in, calculated at their cost prices, may not exceed 10% of the amount of foreign exchange payment for investment approved by the SAFE; and (7) the balance of bonds issued overseas by the Chinese government or Chinese enterprises, which the insurance company invested in, calculated at their cost prices, may not exceed the amount of foreign exchange payment for investment approved by the SAFE. CHAPTER IV INVESTMENT MANAGEMENT Article 11. For overseas use of its insurance-related foreign exchange fund, the head office of the insurance company shall make a unified strategic allocation of assets, and the internal professional fund use department or the related insurance asset management company shall be in charge of the operation and management. No branch of an insurance company may engage in any overseas use of foreign exchange fund. Article 12. Any overseas use of insurance-related foreign exchange fund must be made in accordance with the Guideline for Risk Control in the Use of Insurance Funds and under a well-established risk control system. The risk control system shall at least contain the investment decision-making procedure, investment authorization system, research and reporting system, and risk assessment and performance appraisal index systems. Article 13. In the overseas use of its foreign exchange fund, the insurance company may entrust the investment management to an external professional investment institution meeting the requirements provided in Article 14 herein. Article 14. The external professional investment institution to which an insurance company entrust its investment management must meet the following requirements: (1) being allowed to engage in asset management business pursuant to the law of the country or district concerned; (2) its risk control index conforming to the relevant provisions of the regulatory authority of the country or district concerned; (3) both its paid-in capital and net assets being not less than US$60 million respectively or its equivalent in other freely convertible currencies, and the assets under its management being not less than US$50 billion or its equivalent in other freely convertible currencies; (4) having a sound corporate governance structure and well-established internal management system and risk control mechanism, and having no record of any major illegal or irregular act in the country or district concerned in the past three years; (5) having at least ten years of experience in international asset management business, and having professional investment personnel of a corresponding number; (6) committing in writing to a promise that, when necessary, it shall, at the request of CIRC, provide the exact state of transactions relating to the overseas use of insurance-related foreign exchange fund; (7) the country or district concerned having a well-defined financial regulatory system, and there being a memorandum of understanding concerning regulatory cooperation and effective regulatory cooperation relations between financial regulatory authority of the country or district concerned and the Chinese financial regulatory authority; and (8) other requirements for prudence that may be provided by CIRC. The provisions concerning professional investment institutions established overseas by domestic financial institutions, to which the management of insurance-related foreign exchange fund is entrusted, shall be separately formulated by CIRC. Article 15. Where an insurance company entrusts its investment management to an external trustee, its internal professional fund use department or related insurance asset management company shall be in charge of the delegation matters, and appraise the risk level of the trusted assets, investment performance and management ability of the external trustee. When selecting an external trustee for the management of insurance-related foreign exchange fund, the risk of management shall be fully taken into consideration, and the foreign exchange fund under trusteeship management shall be decentralized properly. Article 16. In the overseas use of its insurance-related foreign exchange fund, the insurance company shall see that the use matches its liabilities in foreign exchange in terms of term and currency structures. When undertaking overseas use of its insurance-related foreign exchange fund, the insurance company shall give priority to the bonds issued overseas by the Chinese government and Chinese enterprises. CHAPTER V ASSET CUSTODY Article 17. In the overseas use of its foreign exchange fund, the insurance company shall entrust the custody of all its assets used overseas to a domestic commercial bank. The "commercial bank" in the preceding paragraph means any Chinese capital bank, branch of a foreign bank, Chinese-foreign joint venture bank or foreign capital bank in the territory of China. Article 18. A commercial bank to be a domestic custodian of an insurance company shall meet the following requirements: (1) having been a designated foreign exchange bank for three years; (2) its paid-in capital being not less than RMB8 billion yuan, of which, there must be foreign exchange capital in freely convertible currencies at the value of RMB1 billion yuan for a Chinese capital bank; the paid-in capital of the branch of a foreign bank shall be calculated by that of its head office; (3) having obtained qualifications for domestic securities investment fund custody business; (4) having a sound corporate governance structure and well-established internal management system and risk control system; (5) having a special custody department and personnel of corresponding number who are familiar with global custody business; (6) having a safe and efficient clearing and settlement system and emergency mechanism; (7) having no record of any major illegal or irregular act, and neither the head office nor the branch having been heavily punished by the regulatory authority of the country or district concerned, in the past three years; and (8) other requirements that may be provided by CIRC and the SAFE. The branch of a foreign bank shall not be subject to item (3) of the preceding paragraph, if its head office has a custody scale of at least US$100 billion. Article 19. The domestic custodian of an insurance company shall perform the following obligations: (1) to manage the foreign exchange fund and securities entrusted by the insurance company; (2) to open a domestic custody account, external foreign exchange use settlement account and securities custody account in respect of insurance-related foreign exchange fund; (3) to handle outward and inward remittance of foreign exchange fund and the related exchange formalities; (4) to supervise the overseas investment operation by the insurance company, insurance asset management company and external trustee, jointly with the external custody agent; (5) to promptly notify the insurance company of any illegal or irregular investment directions whenever they find any; (6) to supervise the external custody agent and see that the insurance-related foreign exchange fund is in safe custody; (7) to keep for at least 15 years the records, vouchers and other relevant materials of inward and outward remittance and transactions of foreign exchange fund and transactions of securities; (8) to handle the declarations for statistics of the international balance of payment in accordance with the Measures for Declarations for Statistics of International Balance of Payment, Operation Rules for Financial Institutions' Handling Declarations for Statistics of International Balance of Payment, and Operation Rules for Financial Institutions' Handling Declarations of External Asset Balance and Profit and Loss; (9) to assist CIRC and SAFE in inspecting the overseas use of insurance-related foreign exchange funds; and (10) other obligations that may be provided by CIRC and the SAFE. Article 20. The domestic custodian of an insurance company shall submit the relevant reports according to the following provisions: (1) a report on the opening of the insurance company's domestic custody account, external foreign exchange use settlement account and securities custody account shall be made to CIRC and the SAFE within five days from the day they are opened; (2) a report on the insurance company's outward remittance of principal and inward remittance of principal and earnings shall be made to the SAFE with a copy thereof to CIRC within two days from the day of remittance; (3) a report on the receipt and payment in the domestic custody account of the insurance company shall be made to CIRC and the SAFE within five days from the end of each month; (4) a statement of the overseas use of insurance-related foreign exchange fund shall be submitted to CIRC and the SAFE within ten days from the end of each quarter; (5) a statement of the overseas use of foreign exchange fund of the insurance company for the last year shall be submitted to CIRC and the SAFE within one month from the end of each fiscal year; (6) it shall promptly report to CIRC and the SAFE any illegal or irregular investment directions of the insurance company, insurance asset management company or external trustee whenever it finds them; and (7) it shall report other matters to CIRC and the SAFE that may be required by them. Article 21. After receiving the approval document from the SAFE for the amount of foreign exchange payment for investment, the insurance company shall enter into a custody agreement with the domestic custodian by producing such approval document, and open a domestic custody account. Article 22. The insurance company shall submit the following documents to CIRC and the SAFE within five days from the opening of its domestic custody account: (1) a copy of the custody agreement; and (2) a written commitment of the domestic custodian that it shall, according to the relevant provisions, supervise the use by the insurance company of its domestic custody account, external foreign exchange use settlement account and securities custody account. The custody agreement must state the obligations of the domestic custodian provided in Articles 19 and 20 herein. The insurance company is entitled to terminate the agreement earlier if, in the case of any breach by the domestic custodian of the said obligations, CIRC or the SAFE requires the insurance company to replace the domestic custodian with another one. Article 23. The following funds are receipts in the domestic custody account of an insurance company: (1) foreign exchange fund transferred to the account by the insurance company; (2) insurance-related foreign exchange fund remitted to the account from overseas; (3) bank deposit principal and interest income; (4) interest income from bonds and revenue from sale of bonds; (5) interest income from money market derivatives and revenue from the sale thereof; and (6) other receipts. Article 24. The following expenditures are payment in the domestic custody account of an insurance company: (1) fund transferred to the external foreign exchange use settlement account; (2) insurance-related foreign exchange fund remitted back to the insurance company; (3) bank deposit; (4) cost paid for the purchase of bonds, including tax payment, such as stamp tax and capital gains tax; (5) currency exchange fee, custody fee and asset management fee; (6) various service charges; and (7) other expenditures. Article 25. Any overseas commercial bank chosen by a domestic custodian to be its external custody agent must meet the requirements provided in the custody agreement. The domestic custodian shall open an external foreign exchange use settlement account and a securities custody account in respect of the insurance-related foreign exchange fund with its external custody agent for fund settlement and securities custody business. Article 26. The domestic custodian shall choose an overseas commercial bank meeting the following requirements as its external custody agent: (1) its paid-in capital being not less than US$2.5 billion or its equivalent in other freely convertible currencies; (2) having been of at least A grade or its equivalent of long-term credit assessed by an internationally accepted rating agency for the past three years; (3) being qualified for a custodian verified by the regulatory authority of the country or district concerned, or having cooperative relations with the domestic custodian; (4) having a sound corporate governance structure and well-established internal management system and risk control mechanism; (5) having a special custody department and personnel of corresponding number who are familiar with the custody business in the country or district concerned; (6) having a safe and efficient clearing and settlement system and emergency mechanism; (7) having no record of any heavy punishment in the country or district concerned in the past three years; (8) the country or district concerned having a well-defined financial regulatory system, and there being a memorandum of understanding concerning regulatory cooperation and effective regulatory cooperation relations between the financial regulatory authority of the country or district concerned and the Chinese financial regulatory authority; and (9) other requirements for prudence that may be provided by CIRC and the SAFE. Article 27. The insurance company's domestic custodian and its external custody agent must strictly separate their own assets from those under trust, and set up accounts respectively for, and make separate management of, the overseas use of foreign exchange fund of each insurance company. CHAPTER VI SUPERVISION AND MANAGEMENT Article 28. The SAFE may adjust the approved amount of overseas use of insurance-related foreign exchange fund for investment in the light of the overall state of international balance of payment. Article 29. Any overseas use of foreign exchange fund by an insurance company shall be subject to the provisions of Articles 9 and 10 herein, and the insurance company may not commit any of the following acts: (1) granting a loan to or providing guarantee for others; (2) money laundering; (3) conspiring with its external trustee, domestic custodian and external custody agent to obtain illegal gains; or (4) other acts prohibited by the relevant laws or provisions of China or any other country or district concerned. Article 30. When entering into a relevant agreement respectively with its external trustee and domestic custodian, the insurance company shall expressly require the external trustee and domestic custodian to promptly provide the relevant statements and related materials to CIRC and the SAFE. Article 31. CIRC and the SAFE may require the insurance company and its domestic custodian to provide the materials relating to the overseas use of insurance-related foreign exchange fund and, when necessary, conduct on-the-spot inspection on the insurance company or entrust such inspection to a professional agency. Article 32. No overseas commercial bank entrusted with the management of insurance-related foreign exchange fund may concurrently be the domestic custodian or external custody agent. Article 33. If any of the following circumstances occurs, the insurance company shall report it to the SAFE within five days from the occurrence: (1) any change of its external trustee, domestic custodian or external custody agent; (2) any significant change in its registered capital and shareholding structure; (3) being involved in any major litigation, subject to any heavy punishment or any other serious matters; or (4) other circumstances that may be provided by the SAFE. The occurrence of circumstances under items (1) and (3) of the preceding paragraph shall also be reported by the insurance company to CIRC. Article 34. If any of the following circumstances occurs, the insurance company's domestic custodian shall report it to CIRC and the SAFE within five days from the occurrence: (1) any significant change in its registered capital and shareholding structure; (2) being involved in any major litigation or subject to any heavy punishment; or (3) other matters that may be provided by CIRC and the SAFE. Article 35. Any insurance company and its domestic custodian violating these Measures or any other provisions concerning insurance and foreign exchange control shall be given by the relevant regulatory authorities administrative penalties pursuant to their respective authorities and regulatory functions. In the case of any gross violation by an insurance company of these Measures, CIRC may restrict the company's scope of business, order the company to cease accepting new business or revoke the company's license for insurance business. In the case of any gross violation by the domestic custodian of these Measures, CIRC may order the insurance company to replace the domestic custodian. Article 36. If the external trustee entrusted with the management of insurance-related foreign exchange fund violates the relevant provisions, CIRC and the SAFE may require the insurance company to replace such external trustee. CHAPTER VII SUPPLEMENTARY PROVISIONS Article 37. For the materials submitted to CIRC and the SAFE under these Measures, those in Chinese shall be regarded as the authentic ones. Article 38. The use by an insurance company of foreign exchange fund in the Hong Kong Special Administrative Region and Macao Special Administrative Region shall be conducted by referring to the relevant provisions of these Measures. Article 39. The overseas use of foreign exchange fund by an insurance management company shall be conducted by referring to these Measures. Article 40. In these Measures, "day" means a working day not including any festival or holiday. Article 41. The power of interpretation of these Measures shall be vested in CIRC and the People's Bank of China. Article 42. These Measures shall come into force as of the date of promulgation. |
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