China is preparing a sweeping revision of its insurance law, with regulators proposing stronger supervision of insurers, tighter corporate governance requirements, greater protection for policyholders and enhanced safeguards against financial risks.
The National Financial Regulatory Administration published a draft amendment to the Insurance Law on 4 September for public consultation. Stakeholders and members of the public have been invited to submit their views by 3 October. The proposed changes represent a significant overhaul of the country’s existing legal framework for insurance and come as the sector faces increasingly complex financial, investment and governance risks.
The draft contains 214 articles, compared with 185 under the current law. The expansion reflects an effort to address areas where existing provisions may no longer fully match the scale and complexity of China’s rapidly developing insurance market.
One of the most notable proposals concerns the minimum registered capital required to establish an insurance company. The current requirement of 200 million yuan would be raised to 1 billion yuan under the proposed amendments.
The higher capital threshold is intended to strengthen the financial foundations of insurers and improve their ability to withstand market volatility, unexpected losses and other financial pressures. At the same time, a substantially higher entry requirement could make it more difficult for smaller or less well-capitalised companies to enter the market, placing greater emphasis on financial strength among insurance providers.
Greater scrutiny of shareholders and controllers
The draft also proposes tighter oversight of shareholders and the individuals or entities that exercise actual control over insurance companies.
Regulators would be given stronger powers to identify the real controllers of insurers rather than relying solely on formal ownership records. The proposed framework seeks to address situations in which nominal shareholders may obscure the actual ownership or influence behind a company.
Shareholders would also face greater responsibilities in areas such as providing capital, maintaining sound corporate governance and conducting transactions with related parties. The proposed provisions aim to limit improper shareholder intervention in the day-to-day management of insurers and strengthen accountability within ownership structures.
Broader investment options for insurers
Changes are also proposed to the rules governing insurance fund investments. The revised law would provide clearer recognition of insurers’ ability to invest funds in equities, asset-management products, gold and various types of futures contracts.
For insurers managing large pools of long-term funds, broader investment options could provide greater flexibility in allocating capital. Such flexibility, however, also increases the importance of appropriate risk controls. The draft therefore places considerable emphasis on internal controls, solvency, asset-liability management and comprehensive risk management.
The proposed framework is designed to enable regulators to intervene earlier when an insurer begins showing signs of financial weakness, rather than waiting until problems develop into a wider crisis.
Stronger arrangements for troubled insurers
The draft would also strengthen arrangements for dealing with insurers facing serious financial difficulties. Regulators would have clearer mechanisms for controlling troubled companies and, where necessary, facilitating an orderly exit from the market.
The underlying objective is to prevent difficulties at an individual insurer from spreading to other parts of the financial system. Such measures are particularly relevant to the broader effort to contain systemic financial risks and maintain stability across China’s financial sector.
Policyholder protection takes centre stage
Consumer protection is another major element of the proposed reform. The draft includes measures intended to make insurance contracts clearer, strengthen policyholders’ rights and improve transparency in insurers’ business practices.
Clearer contractual arrangements are particularly significant in insurance because policyholders often rely on complex terms and conditions when purchasing long-term products. Strengthening disclosure and business conduct requirements could therefore help improve accountability between insurers and their customers.
The proposed amendments would also introduce tougher penalties for violations of insurance regulations. Insurers, shareholders and actual controllers could face greater financial and regulatory consequences for failing to comply with the law.
Part of China’s wider financial reform agenda
The proposed insurance-law overhaul forms part of China’s broader efforts to strengthen the resilience of its financial system. Authorities have increasingly focused on capital strength, corporate governance and risk management across financial institutions, including banks and insurance companies.
If the amendments are ultimately adopted, China’s insurance industry could face a stricter regulatory environment covering capital requirements, ownership structures, governance, investment activities, risk management and consumer protection. At the same time, insurers could gain greater flexibility in managing long-term funds through clearer investment provisions.
The current document remains a draft and is therefore subject to change. After the public consultation closes on 3 October, regulators are expected to review the feedback and recommendations before making further revisions and advancing the legislation through the relevant law-making process.
The final impact will depend on the provisions ultimately adopted. Nevertheless, the draft signals a clear attempt to place stronger financial foundations and greater accountability at the centre of China’s insurance regulatory framework, while giving insurers a more clearly defined set of tools for managing long-term capital.
