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The Chinese authorities yesterday announced provisional rules governing insurance companies' foreign exchange dealings, filling a legal lacuna that has led to irregularities.
The rules, promulgated jointly by the State Administration of Foreign Exchange (SAFE) and China Insurance Regulatory Commission (CIRC), contained clauses on the market access of forex-related insurance services, the roles of insurance brokerages and agencies, as well as forex management requirements.
The provisional regulations will take effect on Friday and cover all insurance firms in the country, including both Chinese and foreign insurers as well as their joint ventures.
Over recent years, "foreign exchange businesses in the insurance sector has been growing rapidly and foreign exchange payments have been frequent," a spokesman representing both the SAFE and CIRC said. "But related legislation was lagging behind and could not meet the needs of the rapid growth."
The new rules circumscribe the business scope by which insurers are allowed to both accept premiums and pay claims in foreign currencies. Regulators used to work on a case-by-case basis. The business scope includes life insurance, property insurance and reinsurance, but is limited to the services under existing regulations.
"It may not have a great impact on insurance services, but we now have a legal base to stick to," a SAFE official said, adding: "And the rules will be of great convenience to the Chinese people."
Some Chinese residents who need foreign exchanges for study or travel purposes, have been buying insurance policies from overseas to get forex coverage. They can now buy forex-denominated policies from domestic insurers to cover the risk of personal accident and medical expenditure overseas.
Insurers are also allowed to invest their forex premium incomes in ways that are authorized by the government. But Liu Shuqin, a manager with the Taikang Life Insurance Co Ltd, said Taikang's forex holdings, which came from foreign shareholders' equity, can only be deposited with banks.
She said the scope should be widened to allow higher yields, necessary to secure insurers' forex payment capabilities.
(China Daily October 30, 2002)
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