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SAFE News
  • Index number:
    000014453-2019-0277
  • Dispatch date:
    2019-06-05
  • Publish organization:
    State Administration of Foreign Exchange
  • Exchange Reference number:
  • Name:
    SAFE Official Answers Media Questions on Facilitating Insurance Companies in Settlement of Foreign Exchange Capital
SAFE Official Answers Media Questions on Facilitating Insurance Companies in Settlement of Foreign Exchange Capital

The State Administration of Foreign Exchange (SAFE) has recently issued the Circular on Further Facilitating Insurance Companies in Settlement of Foreign Exchange Capital (Huifa No. 17 [2019], hereinafter referred to as Circular). The official of the SAFE has answered press questions on relevant issues.

1. Could you brief us on the background of the Circular?

A: In recent years, the SAFE has been actively serving China's new pattern of all-round opening-up, deepening reform and opening up in foreign exchange, driving the reform of "delegation, administration and service, and constantly improving the capacity and level of foreign exchange administration to serve the real economy. In March 2015, reform on insurance-related foreign exchange administration was carried out to streamline business application materials and approval procedures, and improve the efficiency of foreign exchange insurance business. With the constant expansion of opening-up and the development of financial marketization, insurance companies have raised new demands for fund facilitation of foreign exchange insurance business. On the basis of fully investigating the demands of market entities and soliciting opinions from various parties, the SAFE has further promoted administration streamlining and power delegation, improved foreign exchange administration of insurance business, made research and issued the Circular.

II. What are the main contents of the Circular?

A: The Circular adheres to the "principle of actual demand", cancels the approval procedure for settlement of foreign exchange capital of insurance companies, improves the fund use efficiency of insurance companies, clarifies that financial institutions operating foreign exchange business (financial institutions) should conduct authenticity examination of business in accordance with the "three principles of business development", and standardizes the management of foreign exchange insurance business. The main contents include:

The first is to cancel the approval procedure for settlement of foreign exchange capital of insurance companies and implement the discretionary foreign exchange settlement system. An insurance company may, according to actual operating requirements, handle the settlement of foreign exchange capital and funds raised through overseas IPO with a financial institution so as to improve the fund utilization efficiency of the insurance company.

The second is to allow insurance intermediaries to conduct foreign exchange settlement or purchase of indemnities under insurance-related collection and payment for clients. Financial institutions shall examine the authenticity of foreign exchange settlement or purchase. The insurance agencies and insurance brokers that meet the requirements of the competent insurance authorities may directly handle foreign exchange settlement of indemnity funds under the insurance-related collection and payment for clients with a financial institution provided that the recipient of indemnities presents a power of attorney for foreign exchange settlement, so as to improve the payout efficiency with RMB for cross-border insurance-related collection and payment for clients.

The third is to improve the ongoing and ex-post regulation of insurance-related foreign exchange business. The business compliance requirements of insurance institutions such as negative issues report shall be refined to ensure the healthy development of foreign exchange insurance business.

III. What is the main consideration that allows insurance intermediaries to conduct foreign exchange settlement for indemnity funds under collection and payment for clients?

A: With the constant expansion of opening-up and the development of financial marketization, in the efforts of serving the Belt and Road construction, more and more insurance intermediaries, especially insurance agencies and insurance brokers, are going global to serve cross-border insurance business. In the survey of market entities, some insurance intermediaries reflect the problem in RMB payout efficiency of cross-border insurance-related collection and payment service for clients. For example, due to the sudden occurrence of maritime and marine travel business, if the insurance intermediaries are not allowed to conduct exchange settlement of indemnity funds under the insurance-related collection and payment for clients, they will not be able to directly pay RMB to the policyholders, thus affecting the timeliness of relief efforts.  The relaxing of the requirement for settlement of indemnity funds under collection and payment for clients by insurance intermediaries can effectively solve this problem and better serve the Belt and Road construction.

IV. What contents shall be included in the independent report of negative issues of insurance institutions according to the Circular?

A: The Circular adds a new management mode for insurance institutions to actively report negative issues. The reported items of insurance companies include: no foreign exchange insurance business undertaken for two consecutive years after obtaining the license to operate foreign exchange insurance business, being taken over by the insurance regulatory authorities, committing serious violation of laws and regulations and receiving administrative penalties. The reported items of insurance agencies and brokers include having committed serious violations of laws and regulations and having received administrative penalties. Local SAFE branches may require insurance institutions, if needed, to make rectification in order to effectively guard against financial risks.

 

 

The English translation may only be used as a reference. In case a different interpretation of the translated information contained in this website arises, the original Chinese shall prevail.

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