Answer: In recent years, it has become one of the industry chaos to carry out interest transmission through irregular related party transactions. By setting up non-financial subsidiaries or layers of nested financial products, individual insurance companies can convey interest to related parties and regard insurance companies as cash machines, which causes significant risks and arouses great social concern. The Interim Measures for the Management of Associated Transactions of Insurance Companies formulated more than ten years ago can no longer meet the needs of risk prevention and strong supervision. First, the regulatory system is imperfect and there is a regulatory gap. For example, the original provisions do not clarify the responsibility of the insurance company for the management of affiliated transactions of subsidiaries, leading some actual controllers to take subsidiaries of insurance companies as capital transfer stations, bypass access to insurance funds, to avoid the review of affiliated transactions. Second, there are various forms of related party transactions, the original provisions lack of penetrating the regulatory content and means, and there are regulatory blind areas, which are difficult to meet the needs of affirmation of related party transactions. Thirdly, the system is scattered and does not form a unified and comprehensive system, which is not conducive to the operation and implementation. In order to strengthen the supervision of related party transactions, we have formulated and promulgated the present Measures.
Answer: The Measures clarify the principles of strict supervision and penetration of supervision, establish a pre-event, in-event and post-event review and reporting system of related transactions, highlight the key points and focus on monitoring the related transactions and large-scale fund use of institutions with imperfect corporate governance, and require insurance companies to improve market competition. Strive to control the number and scale of related party transactions, so as to achieve the regulatory objectives of improving the operational independence of insurance companies and preventing the risk of interest transmission.
3. What is the overall structure of the Measures?
There are seven chapters and sixty-four articles in the Measures. According to the management process of affiliated transactions, they are clearly stipulated in the affirmation of affiliated relationships, internal control management and external supervision of affiliated transactions. Chapter I, General Principles, clarifies the legal basis and general principles for the formulation of the Measures. Chapter 2: Affiliated party and affiliated transaction, clarifying affiliated party identification criteria and types of affiliated transaction. Chapter 3 calculates and limits the amount of related party transactions, defines the calculating methods of different types of related party transactions, and sets proportional supervision indicators for related party transactions of fund utilization. Chapter IV: Internal control of affiliated transactions, clearly requires insurance companies to establish board of directors control committee on affiliated transactions, strengthen the management, review, approval and risk control of affiliated transactions, and clearly stipulate the management and approval process of major affiliated transactions and unified transaction agreements. Chapter 5: Report and disclosure of related party transactions, stipulating the content, time limit and path of report and disclosure to strengthen external supervision. Chapter 6: Supervision and management of related party transactions, stipulating measures for management and review of related party transactions, and perfecting corresponding regulatory measures according to law. Chapter VII, Supplementary Provisions, gives a detailed explanation of the professional terms in the Measures.
Fourthly, from what aspects did the Measures optimize the original system?
Answer: First, improve the management of related parties. The board of directorsrelated party transaction control committee is required to identify and maintain the related party, update the related party information files regularly, and the directors, supervisors, senior managers and other related parties should report the related party situation to the insurance company in time. At the same time, the insurance company is required to report the related party situation to the insurance company in accordance with the principle that substance is more important than form. The related parties with inclined interests are identified. Second, strengthen the internal control system of related party transactions. In terms of management mechanism, insurance companies are required to set up related party transactions control committees and offices in the board of directors and management level, which are responsible for the overall management and daily management of related party transactions respectively. Increasing the active management responsibility of insurance institutions requires insurance companies to further optimize the management process, clarify the responsibility attribution, and achieve traceability of the whole process of management and control. To clarify the process of initiation and approval of internal accountability, stipulate that the relevant subjects of insurance companies can make accountability proposals for irregular related party transactions, and the regulatory authorities can also order insurance companies to be accountable for the relevant responsible persons. Third, strengthen external supervision of related party transactions. To improve the regulatory review measures, the regulatory authorities may, according to the circumstances, request insurance companies and their affiliates to provide additional relevant materials, or make public inquiries about them. At the same time, the Measures strengthen social supervision and improve the disclosure standards of related party transactions. Insurance companies are required to disclose the related party transactions not only in accordance with accounting standards, but also in accordance with regulatory standards. Fourth, strengthen the supervision of related party transactions. Insurance companies are required to establish a whole-process monitoring system with the flow of funds as a clue to effectively prevent cross-company, cross-industry and cross-domain risk transmission. Make penetrating recognition rules, and identify actual controllers, concerted actors and the final beneficiaries of financial products according to the principle that substance is more important than form. Fifthly, strengthen the supervisory responsibilities. The Measures set up special chapters to clarify the management and supervisory responsibilities. They require the relevant parties of insurance companies, such as shareholders, directors, supervisors and senior managers, to disclose truthfully relevant information about the relationship and not to conceal or provide false statements. The CBRC can take regulatory measures against irregularities and related responsible persons according to law, and strengthen the supervision of the responsible subjects.
Source: Wang Xiaowu_NF, Responsible Editor of China Banking and Insurance Regulatory Commission