The China Insurance Regulatory Commission said it has set up a nonprofit State-owned corporation with registered capital of 100 million yuan to manage its insurance protection fund, amounting to at least 7 billion yuan.
China's insurers have been required to submit up to 1 percent of retained premiums to the insurance protection fund since 2005, which aims to protect policyholders in the event of defaults.
The entire assets of the insurance protection fund, including its 38.8 percent holding in New China Life Insurance, will be transferred to the newly established company.
Wei Yingning, CIRC's vice-chairman, was appointed as the company's chairman and Zeng Yujin, another CIRC official, was named president.
In a separate statement, CIRC, the Ministry of Finance and the People's Bank of China, jointly issued new measures for the administration of the insurance protection fund.
"The new rules are aimed at improving the risk prevention mechanism of the insurance industry, clarifying the management model of the fund and restructure the levy scheme," said the CIRC.
Based on the new rules, insurance companies are required to make payments to the fund at rates based on gross insurance policy sales rather than retained premiums, in order to provide better protection to policyholders rather than insurance companies.
Under the new policy, reinsurance companies are excluded from the fund. As a result, they will no longer be entitled to any form of compensation in the case of default by an insurance company.
Since the insurers' payment scope is enlarged based on gross insurance policy sales, the rules try to lower the payment proportion to alleviate the burden on the companies. Non-investment type property insurance products and non-investment type accident insurance policies are required to contribute 0.8 percent of their sales to the fund, down from the 1 percent required in 2004 under the old rules, according to the statement.
The new rules add investment-type non-life insurance policies to the contribution list for the insurance protection fund. Government-backed, policy-oriented insurance products and company pension fund products are exempt from contributions, according to the statement.
The regulator also broadened the range of products the protection fund can invest in, including central bank bills, central government-owned company bonds and financial bonds issued by the central government's financial institutions. Earlier, the protection fund could only invest in national debt.
Cash from the protection fund can be used, with the approval of the State Council, in cases where insurance companies go bankrupt or when there are material risks, it said, without elaborating.
CIRC said it would supervise the management company for the insurance protection fund, develop supporting measures for the new rules, and encourage the insurance companies to implement the requirements on corporate governance and internal control.