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Merger law reform in Australia: What next after the Exposure Draft?
As expected, the Australian Commonwealth Treasury released an exposure draft for the proposed new Australian merger regime on 24 July 2024.
China | Publication | May 2023
Since China’s accession to the World Trade Organisation (WTO) in 2001, China has been making significant efforts to comply with its WTO commitments and has been progressively opening the Chinese insurance market to the world. Since 2017, China has been the world’s second largest insurance market, only next to the United States. Official data shows that market share for foreign invested insurance companies incorporated in China had increased from 3.5% in 2012 to 7.8% by 2021 and this figure had reached almost 20% by 2021 in major cities like Beijing and Shanghai.
In the past two decades, China has been consistently exploring a proper and safe way to welcome foreign investment. Although the door was opened, following quite a long period of time after China’s accession to the WTO, foreign investors were only permitted to wholly own insurance brokerage subsidiaries (carrying on limited brokerage businesses) and property and casualty insurance subsidiaries. Investors faced substantial regulatory obstacles when investing in other types of insurance businesses.
This situation remained unchanged until late 2018 when Chinese authorities announced a series of policies to open up the market, including abolishing two stringent conditions for greenfield investments, i.e. the requirement for a 30-year track record and a pre-condition to set up a representative office for at least 2 years. As a result of these policies, the pace of opening up the Chinese insurance market has accelerated which resulted in:
Notably, China’s commitment to opening up its insurance sector in the past 20 years exceeds its WTO commitments.
While China is vigorously reducing its market entry requirements, it has tightened up the supervision and management of insurance companies, aiming to establish a healthy and resilient insurance market.
One of the key aims is to strengthen the supervision of shareholders of insurance companies. Major shareholders holding stakes of 15% or more are required to provide extensive warranties and commitments, covering their shareholding activities in, governance of and transactions with their invested insurers, coupled with potential responsibilities to resolve any shortage of capital and liquidity of their invested insurers. Breaching these warranties and commitments may subject the shareholders to a series of legal consequences.
Stepping up the corporate governance supervision of insurers is another key priority. China has spent the past three years improving its insurance governance assessment mechanism, which requires insurers to rectify issues spotted during the assessment. Significant corporate governance concerns include the Communist Party of China’s leadership in an insurer’s corporate governance, and a governance review from various levels (including shareholders’ level, affiliated transactions, board and management level, board of supervisors, internal risk control, and market constraints). Going forward, the Chinese insurance regulator will populate plans on key areas to be assessed annually, so as to establish a dynamic evaluation system.
InsurTech and digitisation has been an unavoidable topic in the insurance sector. Chinese chief financial governors have repeatedly emphasised that China will adopt a “positive but prudent” approach towards the rapidly growing FinTech (including the InsurTech) market.
Internet based business and innovative technologies have been actively encouraged in the insurance sector for years. Most recently, regulators have required insurers to accomplish the digital transformation on business operation and management, data and technology capability construction, and risk control and management by 2025. Digitisation has greatly improved and will continue to promote business efficiency and customer experience.
Nevertheless, the Chinese insurance market players have also been required to carefully deal with new challenges brought about by digital transformation. For example, insurers and insurance intermediaries need to ensure that the online distributions of insurance products, in particular where third party platforms are involved, is conducted and secured under the pre-requisite regulatory licences. With the implementation of China’s new cybersecurity and data privacy regimes, protecting customers’ rights and data and ensuring the network safety has become a main priority. Outsourcing of information technology is encouraged, but it must be carried out in accordance with regulatory requirements. Ultimately, minimising the negative impacts of digital transformation will be a long term regulatory focus in the Chinese insurance industry.
China did not have a formal environmental, social and governance (ESG) regime in the insurance sector until 2022 when the Chinese insurance regulator issued several guidelines and rules. Although they are quite high level, the issue of these standards was regarded as a milestone to develop the ESG regime in the Chinese insurance sector.
Pursuant to these guidelines and rules, Chinese insurers have been required to consider the management of ESG matters during their corporate governance, product manufacturing, and investment management. Whether or not the insurers have adopted ESG management will be a key factor for the insurance regulator to assess and rate insurers. Insurers have been granted a one-year grace period to formulate their ESG-related internal management rules, and are required to disclose their green insurance business related information (such as any business relating to the provision of guarantees to green industries and green lifestyle).
As the ESG concept is gradually gaining popularity in the Chinese insurance industry, market players are taking further action. Some have incorporated ESG management into their underwriting processes and others have offered to provide internal ESG training to employees. Advanced technologies have also been encouraged to assist in ESG-related work.
These recent developments have reiterated China’s commitment to the insurance sector and we expect a more open, mature and resilient Chinese insurance market.
The original article was first published in The Legal 500’s In-House Lawyer, Spring 2023.
Publication
As expected, the Australian Commonwealth Treasury released an exposure draft for the proposed new Australian merger regime on 24 July 2024.
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