Place: Insights / Perspectives / Detail
PRC Further Loosens Insurance Broker Business Scope
2018-05-23Jerry Liu / Jessica Foo

By Jerry Liu / Jessica Foo




On 27 April 2018, the China Banking and Insurance Regulatory Commission ("CBIRC") released the Notice on Lifting the Restriction Over the Scope of Business of Foreign-funded Insurance Brokerage Companies (the "Notice").  The Notice stipulates that foreign-funded insurance brokerage companies may operate the same business as local insurance brokerage companies.  The Notice was issued following President Xi Jinping's speech at the Boao Forum for Asia addressing the need to accelerate the opening up of China's insurance industry, among other substantial market relaxation measures.




Before the issuance of the Notice, the market access of foreign-funded insurance brokerage companies was in substance regulated by the Insurance Industry-related Content in the Legal Documents of China's Accession to the World Trade Organization (“WTO Document”) issued in March 2002.  The WTO Document stipulated that foreign-funded insurance brokerage companies were only allowed to:


(i) provide insurance to international shipping, aviation, and transport businesses;


(ii) broker "master policy" insurance and large-scale commercial insurance; and


(iii) broker reinsurance in selected cities. 


Initially, foreign ownership could not exceed 50% of the brokerage company and the total assets of foreign investor should be at least US$ 500 million.  With China's WTO accession, such restrictions re foreign investor assets thresholds and foreign ownership have been gradually relaxed or removed; but the brokerage scope restriction has not been loosened (except for brokerage companies with less than 25% of foreign ownership, which have not been, in regulatory practice, as foreign-funded brokers).




Pursuant to article 1 of the Notice, the business scope of a foreign-funded insurance brokerage company may now include:


(i) drafting insurance plans for policyholders, selecting insurance companies, and processing insurance applications;


(ii) assisting insured parties or beneficiaries in making claims;


(iii) brokering reinsurances; and


(iv) providing disaster or loss prevention or risk evaluation and management advisory services.


Such a scope is in essence the same as that of a pure domestic brokerage company.  The Notice reflects China's aim to grant equal treatment of foreign and local insurance brokerage companies.  It is important to note that the article 2 of the Notice explicitly provides that in the event of any discrepancy between the Notice and insurance industry-related provisions in the WTO Document, the provisions of the Notice will prevail. 


Article 3 of the Notice continues to note that existing foreign-funded insurance brokerage companies that intend to expand its business scope to cover the newly permitted activities may file their applications with the local CBIRC offices.




Although the Notice relaxed the business scope restriction of foreign-funded insurance brokerages, the Notice itself failed to clarify whether the qualification requirements on the foreign investor(s) are still in place, e.g., in terms of being a foreign insurance brokerage company and assets threshold.  Whether and how such restrictions will also be removed or further relaxed remain to be seen.