China has proposed a sweeping revision of its insurance law as authorities seek to strengthen oversight of insurers, improve corporate governance, protect policyholders and bolster the sector’s ability to withstand 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 until 3 October to submit their views. The proposed changes represent one of the more extensive structural revisions to China’s insurance regulatory framework in recent years.
The draft contains 214 articles, compared with 185 under the existing law. The expansion reflects efforts to address regulatory gaps that have emerged as China’s insurance industry has grown and become more complex. Authorities are seeking to bring areas such as ownership, capital strength, investment activities, risk management and consumer protection under a more comprehensive framework.
One of the most significant proposals concerns the minimum registered capital required to establish an insurance company. Under the current rules, the requirement is 200 million yuan. The draft proposes raising this to 1 billion yuan.
The higher threshold is intended to give insurers a stronger financial base and improve their ability to absorb losses during periods of market instability or financial stress. At the same time, a substantially higher capital requirement could make financial strength an even more important consideration for companies seeking to enter the insurance market.
The proposed amendments also place greater emphasis on shareholders and actual controllers. Regulators would receive stronger powers to identify who ultimately controls an insurer, rather than relying solely on formal ownership records.
The draft also seeks to prevent shareholders from improperly interfering in the day-to-day management of insurance companies. Greater responsibilities are proposed for shareholders in areas including capital contributions, corporate governance and transactions involving related parties. The measures are aimed at making ownership structures more transparent and reducing the risks associated with inappropriate shareholder influence.
Investment rules for insurance funds are another area targeted by the proposed reforms. The draft would more clearly recognise 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, the changes could provide a broader range of investment options. Such flexibility, however, would operate alongside stronger expectations for risk management and internal controls, particularly where investment activities could affect an insurer’s financial stability.
The draft places considerable emphasis on internal controls, solvency and the balance between assets and liabilities. Regulators would have greater scope to respond to emerging risks before they develop into serious financial problems. The approach reflects a shift towards identifying and addressing vulnerabilities at an earlier stage rather than waiting until an institution faces a major crisis.
Rules governing financially distressed insurers would also be strengthened. The proposed framework would provide more structured arrangements for intervening in troubled companies and, where necessary, facilitating their orderly exit from the market. The objective is to limit the possibility that difficulties at a single insurer could spread more widely through the financial system.
Consumer protection is another central element of the proposed amendments. The draft seeks to make insurance contracts clearer, strengthen policyholders’ rights and improve transparency in insurers’ business practices. Clearer contractual arrangements could help customers better understand their obligations and the protection provided by their policies.
Authorities are also proposing tougher penalties for violations of insurance regulations. Insurers, shareholders and actual controllers could face greater financial and other liabilities for non-compliance. The proposed approach is intended to reinforce accountability across the industry rather than placing responsibility solely on corporate entities.
The reform comes as China continues efforts to strengthen the resilience of its wider financial system. Authorities have been placing greater emphasis on capital adequacy, risk prevention and corporate governance across financial institutions. The insurance sector plays an important role in this broader framework because insurers manage substantial pools of long-term funds and provide protection against a wide range of financial and economic risks.
The consultation process will now be closely watched by insurers, shareholders, industry participants and other stakeholders. Authorities will review the comments and recommendations received before making further changes to the draft.
If adopted, the revised law could significantly reshape the operating environment for China’s insurance industry. Companies would face stronger requirements concerning capital, ownership, governance and risk controls, while clearer investment provisions could give them greater flexibility in managing long-term funds.
The proposed overhaul therefore combines tighter supervision with a broader regulatory framework for insurers. Its ultimate impact will depend on the final provisions adopted after the consultation and subsequent legislative process.