Zhou Yanli, head of China Insurance Regulatory Commission (CIRC), Shanghai Office, the insurance market watchdog, said the new rules have been promulgated in accordance with China's WTO membership.

The regulations also spell out procedures and requirements regarding registration, supervision, liquidation and liability, as well as business scope, for overseas insurers.

According to the new regulations, foreign-funded insurance companies may wholly or partially manage, in accordance with the law, the following types of insurance businesses: property insurance services, including property damage insurance, liability insurance, credit insurance and other insurance businesses.

They can also engage in life insurance business including life insurance, health insurance, accidental injury insurance and other insurance businesses.

Branches of foreign insurance companies operating in China are also included.

Overseas-funded insurers may, within the verified scope, manage large-scale commercial risk insurance business and omnibus clause insurance business.

However, the one and the same foreign-funded insurance company is not allowed to engage in both property insurance and life insurance business simultaneously.

"The new rule is a milestone to further the development of China's insurance industry," said Benno Freiherr von Canstein, general manager of Allianz Dazhong Life Insurance Co, a joint venture between Germany's Allianz Group and Dazhong Insurance Co Ltd of China.

Simplified procedures

Compared with the 1992 edition, the new regulations have simplified the application procedures, making various issues clearer for overseas-funded insurers doing business in Chinese mainland.

According to the new rule, a foreign insurance company applying to establish a foreign-funded insurance company must have engaged in the business for more than 30 years and have maintained a representative office within the territory of China for more than two years, one year shorter than in the 1992 edition.

"The rules are firm yet flexible enough to allow the companies room to grow and prosper," said Anthony Higgins, CEO of John Hancock Tianan Life Insurance Company, a Sino-US joint venture.

He added that these rules can foster rapid growth of the industry, and thus constitute another positive way in which the Chinese regulatory authorities are fostering the growth and modernization of the Chinese life insurance industry.

As for those who haven't received a licence from CIRC, the new rules bring them good news in terms of transparency.

According to the new regulations, CIRC shall conduct a preliminary review and decide to accept or deny within six months of receiving the completed application for establishing a foreign-funded insurance company. An official application form shall be issued upon acceptance, whereas a notice with reasons of decision stipulated in writing shall be issued upon denial.

"So we don't have to wait and do nothing, instead, we will be able to know what to do even if our application is denied," said Donald Dong, Shanghai chief representative of Britain's Standard Life Assurance.

The new regulations also allow applicants to complete the formation within one year of the receipt of the official application form. A maximum extension of three months may be granted, which gives insurers more time for preparation.

Complaints

Some of its articles, however, drew complaints from overseas-funded insurers.

"The requirement for an overseas insurer's mainland branch to have a minimum registered capital of 200 million yuan ($24 million) or the equivalent of a fully convertible currency is unreasonable," said Wang Xiaobing, general manager of Royal & Sun Alliance Insurance Plc's Shanghai branch.

Foreign insurers complain that this places a very heavy burden on them.

They expect that CIRC should strive over time to eliminate all barriers to expansion by foreign life insurance companies.

"The distinctions between domestic and foreign companies should be removed or diminished as quickly as possible, thus creating one market in which all are free to compete within the insurance regulatory framework and the insurance laws of China," said John Hancock Tianan's Anthony Higgins.

"We believe that these rules, along with the emerging China insurance laws that are now being revised, will lead to the overall positive development of the Chinese life insurance industry," he added.

The 14 foreign-funded insurance companies in Shanghai contribute 13.6 per cent to the city's 18 billion yuan ($2.2 billion) premium income last year.

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