The China Banking and Insurance Regulatory Commission has formulated its Interim Rules for Insurance Asset Management Products as an addendum to its Guidance for Regulating the Asset Management Business of Financial Institutions which came into effect on Mayday.
The rules aim to bestow more responsibilities on service agencies, detailing the qualifications and responsibilities of custodians, investment advisors and others and making them more accountable for their actions.
The Rules consists of 66 articles in eight chapters, including:
- general provisions;
- relevant parties of asset management products;
- product issuance, renewal and termination, making issuers more accountable;
- product investment and management;
- information disclosure and reporting;
- risk management;
- supervision and management; and
- supplementary provisions.
The rules state that insurance asset management products are supposed to be private placement products and are issued to qualified investors non-publicly. Qualified/accredited investors, including HNW investors over a certain threshold, are allowed to invest in hedge funds, venture capital funds, private equity offerings and other private placements such as these.
The forms of products include debt investment plans, equity investment plans and insurance asset management product portfolios.
The rules clarify the product issuance mechanism as well, promoting the registration of debt investment plans and equity investment plans and the filing of insurance asset management product portfolios for product issuance. They cancel the review and approval requirements for the first issuance of insurance asset management product portfolios. At the same time, they set out clear requirements for the registration and filing agencies and impose heavier responsibilities as well as in-process and ex-post supervision.
The rules are also strict in regulating the operation of products, hoping to preclude 'rigid payment,' multi-layer nesting, de-channelling, the prohibition of fund pooling business and "restricting duration mismatch."
The aim is also to improve the product risk management mechanism by making insurance asset management agencies set aside risk reserves.
They also call for look-through supervision, obliging institutions to identify the actual investors accurately, along with the ultimate sources of funds of insurance asset management products. They must fully disclose information such as the investment of funds, investment scope and transaction structure.
Real names, real policies
Meanwhile, the CBIRC is trying to establish a "real-name management system for individual insurance," having drafted the Rules on Real-Name Registration of Individual Insurance and laid them open to the public for comments. The 'real names' of which it hopes to keep track are of people and not corporations, with money-laundering control as one of its aims. The proposal is to make "real-name information" include a person's name, identification document type, number and validity period, along with the type of insurance business, basic contents and real-name payment information for the applicant.
The CBIRC wants the eventual rules to apply to an insurance period of more than 7 days and a total premium of above 200 renminbi or its equivalent in foreign currency, insurance policy-pledged loan business. It also wants them to apply to surrender and claim settlement business with amount of more than 10,000 renminbi. Insurance companies and insurance intermediaries are to be the main bodies responsible for verification, but wealth managers who control the investments might be involved at times also.