Reinsurance Rules Tighten in China November 2005 – Issue 10
New rules for reinsurance in China will replace the current compulsory
reinsurance cession to China Re (five percent of every risk written) but will keep
a higher percentage of reinsurance share and premium in China. Beginning
December 1, 2005, at least 50 percent of all permitted reinsurance must first
be offered to locally licensed reinsurers. Foreign insurers operating in China will
not be permitted to reinsure any share to affiliated companies without prior
approval by government regulators.
There are currently six locally licensed “professional reinsurers” in China: China
Re, PICC Property & Casualty Re, China Life Re, Munich Re, Swiss Re and
General Cologne Re.
The new regulations will apply to both facultative and treaty reinsurance. The
changes are likely to affect controlled master programs, insurance captives and
locally fronted global programs. The limitations on exportable reinsurance may
mean a substantial loss of business for insurers without the appropriate license
in China. Affected parties should contact their insurance and reinsurance
advisers to explore the impact these moves may have on their programs and
Highlights of the New Rules should not exceed 80 percent of the
original sum insured or limit of
• When arranging treaty reinsurance and liability.
facultative reinsurance, direct insurance – The reinsured amount of any one risk
companies must first approach to an affiliated reinsurance company
companies within People’s Republic of of the original proposer by any one
China (PRC) according to the following facultative contract should not exceed
stipulations: 20 percent of the original sum insured
– Offers should be sent to at least two or limit of liability.
professional reinsurance companies • Local foreign insurance companies are
within the territory of PRC. not allowed to transact reinsurance
– Total shares offered must not be lower business with their affiliated companies
than 50 percent of the total unless otherwise approved.
• Except for Aviation, Nuclear, Oil and Other Notable Excerpts
Credit insurance, direct insurance • Insurance brokers engaged in reinsurance
companies arranging treaty reinsurance broking must not impair the reputation or
and facultative reinsurance must comply legitimate rights and interests of
with the following stipulations: insurance companies.
– The reinsured amount of any one risk • Brokers may introduce and design
to a single reinsurance company reinsurance contracts.
Willis International • November 2005
• Brokers must handle account statements and invoices along
with any other duties according to their agreements with
ceding companies. Brokers must not misappropriate or
withhold reinsurance premiums, claims recovered,
reinsurance commissions or expenses recovered.
• At the request of reinsurance companies, reinsurance brokers
shall, according to their agreements with ceding companies,
notify reinsurance companies of the retentions of their ceding
companies and other circumstances relating to direct
• At the request of ceding companies or reinsurance
companies, brokers may assist in the claims handling process.
Regulations for Chinese and Foreign
Companies Operating in China Contacts
Before 1 December 2005 For additional information,
contact your local Willis office or:
(100%) Local Policy
5% to China Re Howard Tsang
95% minus local insurer's retention can be reinsured to reinsurers outside of China 7 Hanover Square
(including master policy and captive insurers). New York, NY 10004
Tel: 212 837 0641
After 1 December 2005 Fax: 212 344 2780
(100%) Local Policy
Willis Pudong Insurance Brokers
If local policy is issued by If local policy is issued by
foreign insurers 11/F International Ocean
(Foreign companies operating Shipping & Finance Center
in China cannot reinsure share 720 Pudong Ave.
back to an affiliated group company Shanghai, PRC
without prior CIRC approval): Tel: 86 21 5036 6298 ext. 292
At least 50% of any reinsurance requirement (treaty/facultative)
must be offered to at least two of the following reinsurers:
• China Re
• PICC Property & Casualty Re
• China Life Re
• Munich Re
• Swiss Re
• General Cologne Re
Balance (100% minus what is accepted by reinsurers, minus local insurer's retention),
can be reinsured to reinsurers outside of China.
2 Willis International • November 2005