The branches and foreign exchange administration departments of the State Administration of Foreign Exchange (SAFE) in all provinces, autonomous regions, and municipalities directly under the Central Government, and the SAFE branches in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo, the insurance group (holding) companies, the insurance companies, the insurance asset management companies and the designated China-funded foreign exchange banks:
To further drive efforts of streamlining administration and delegating power to lower levels, improve the foreign exchange administration of insurance business, and guard against financial risks, the relevant issues with regard to the foreign exchange administration of insurance business are hereby notified as follows:
I. An insurance company may handle the settlement of foreign exchange capital and funds raised through overseas IPO with a financial institution engaging in foreign exchange business (“financial institution”) according to the actual operating requirements.
(I) Insurance companies are required to report the current year plan and previous year results of their foreign exchange settlement to the local SAFE branch or foreign exchange administrative department (“the local SAFE branch”) by the end of January each year, and submit the following documents:
1. Description of business operations, including, but not limited to, source of foreign exchange capital, amount and purpose of foreign exchange settlement, mismatch between assets in domestic and foreign currencies, and utilization of funds settled during the previous year;
2. Relevant supporting documents.
Any foreign exchange settlement exceeding the reported plan and single transaction exceeding USD 50 million (inclusive) shall be reported by the insurance company concerned to the local SAFE branch in advance.
(II) Financial institutions shall abide by the principles of “knowing your customer”, “knowing your business” and “due diligence” to examine the authenticity of documents for foreign exchange settlement, including:
1. foreign exchange settlement application, including, but not limited to, source of foreign exchange funds, amount and purpose of foreign exchange settlement;
2. plan for utilizing funds with foreign exchange settled and the supporting materials;
3. the audited balance sheets and income statements in RMB and foreign currency for the previous year; or the balance sheet and income statement for the recent period from an insurance company established for less than one year; or the balance sheet and income statement disclosed for the most recent period from a listed insurance company which has not disclosed its balance sheet and income statement for the previous year.
(III) The RMB funds settled shall be used for purposes meeting the requirements prescribed by the insurance authority and the SAFE, such as setup of new branch office, daily operating expense, payment for domestic equity investment and RMB deposit margin.
II. After completing relevant business filing with competent insurance authorities, the insurance agents and brokers can transfer the funds for insurance-related collection and payment for clients in the original currency through their foreign exchange accounts under the current account, with indemnities eligible for settlement or purchase of foreign exchange.
(I) Insurance agents and brokers shall report to the local SAFE branch their current year plan for insurance-related foreign exchange collection and payment for clients by the end of January each year, and the business operations for the last quarter within the first 5 working days of each quarter, and submit the following documents:
1. Description of business operations, including, but not limited to, foreign exchange collection and payment for clients under insurance , list of overseas insurance partners, amount of foreign exchange collection and payment; and for settlement or purchase of foreign exchange for indemnities, the description should also include basic information on the settlement or purchase of foreign exchange for indemnities, amount of insurance indemnities and the corresponding amount of foreign exchange collection and payment, amount of foreign exchange settlement or purchase;
2. Relevant supporting documents.
Any foreign exchange settlement or purchase exceeding the reported plan and single transaction exceeding USD 50 million (inclusive) shall be reported by the insurance agent or broker concerned to the local SAFE branch in advance.
(II) When insurance agents and brokers conduct foreign exchange settlement of indemnities under insurance-related collection and payment for clients, the funds settled shall be transferred directly to the account of the recipient; for indemnities funds paid for clients to the account of the recipient, the funds settled can be retained by the insurance agents and brokers. Financial institutions shall examine the authenticity of foreign exchange settlement, and relevant materials include:
1. Description of business operations, including, but not limited to, reason for foreign exchange settlement, name of recipient of indemnities, opening bank account number;
2. Letter of proxy for foreign exchange settlement written by the recipient;
3. Plan for foreign exchange collection and payment for clients under insurance;
4. Other supporting documents required by financial institutions.
Where insurance agents and brokers conduct foreign exchange purchase for indemnities under insurance-related collection and payment for clients, financial institutions shall examine the authenticity of the transaction.
III. Insurance companies and their branches which have serious violations of laws and regulations and have received administrative penalties by the competent insurance authorities or the SAFE within the last three years are not eligible to apply for foreign exchange insurance business.
IV. Insurance companies and their branches in any of the following circumstances, and insurance agents or brokers and their branches in the circumstance set out in this Paragraph (III) shall report to the local SAFE branch and submit an explanation letter within 20 working days since the case occurred or was found out. The local SAFE branch may request, where appropriate, the insurance companies, insurance agents or brokers and their branches to rectify, and acceptance of new foreign exchange insurance business shall be suspended during the period of rectification.
(I) No foreign exchange insurance business has been undertaken for two consecutive years after the business license is issued;
(II) Take-over announcement by the insurance authority has been received or there exist significant potential risks;
(III) Having committed serious violations of laws and regulations and having received administrative penalties by the insurance authority or the SAFE.
V. To ensure the compliance of cross-border collection and payment, domestic transfer, settlement and sales of foreign exchange conducted by insurance companies, insurance agents and brokers and their branches, the local SAFE branch shall perform supervision and management on the transactions, and conduct verification and inspection according to the law.
VI. Where cross-border collection and payment, domestic transfer, settlement and sales of foreign exchange conducted by financial institutions, insurance companies, insurance agents and brokers and their branches violate relevant provisions in this Circular, the foreign exchange authorities shall impose punishment according to the Regulations of the People’s Republic of China on Foreign Exchange Administration and other regulations.
VII. For the purpose of the Circular, an insurance company refers to the commercial insurance company or policy insurance company which is established and duly registered with the approval from the competent authority in the insurance industry. This Circular also applies to insurance group (holding) companies and insurance asset management companies.
VIII. This Circular shall come into force as of July 1, 2019. Insurance group (holding) companies, insurance companies, insurance asset management companies, insurance agents and brokers shall report to the local SAFE branches their plans for settlement of foreign exchange capital and foreign exchange funds raised through overseas IPO, or foreign exchange collection and payment for clients under insurance for the second half of 2019 before June 30, 2019. Article 34 in the Circular of the State Administration of Foreign Exchange on Printing and Issuing Guidelines for Foreign Exchange Administration for Insurance Business (Huifa No. 6 [2015]) shall be rescinded at the same time; where there is inconsistency between the original Article 4 and 30 and this Circular, this Circular shall prevail. This Circular shall prevail in case of inconsistencies between other relevant regulations and this Circular.
Upon receipt of this Circular, the SAFE branches and foreign exchange administrative departments should immediately forward it to the central sub-branches, sub-branches, local commercial banks, and foreign banks within their respective jurisdiction. Upon receiving this Circular, the insurance companies and the designated China-funded foreign exchange banks should promptly forward it to their branches.
If you have any questions during the execution of these documents, please promptly contact the Current Account Management Department of the SAFE.
Please follow the Circular in your implementation.
The State Administration of Foreign Exchange
May 31, 2019
