Circular of the China Securities Regulatory Commission concerning the Promulgation of the Rules for the Compilation of Information
Disclosures by the Companies Offering Securities to the Public (No. 3) — Special Provisions on the Contents and Formats of Prospectuses
of Insurance Companies
Zheng Jian Fa Xing Zi [2006] No. 151
Each insurance company and recommendation institution:
The Rules for the Compilation of Information Disclosures by the Companies Offering Securities to the Public (No. 3) — Special Provisions
on the Contents and Formats of Prospectuses of Insurance Companies are hereby promulgated for the purpose of regulating the information
disclosure of the insurance companies offering securities to the public, and shall be implemented as of the promulgation date .
The China Securities Regulatory Commission
December 8, 2006
Rules for the Compilation of Information Disclosures by the Companies Offering Securities to the Public (No. 3) — Special Provisions
on the Contents and Formats of Prospectuses of Insurance Companies (Amended in 2006)
Article 1
In accordance with the Company Law of the People’s Republic of China, the Securities Law of the People’s Republic of China, the Insurance
Law of the People’s Republic of China, as well as the relevant provisions formulated by the China Securities Regulatory Commission
(hereinafter referred to as the CSRC) and the China Insurance Regulatory Commission (hereinafter referred to as the CIRC), the present
Provisions are formulated to regulate the information disclosure of the insurance companies that offer securities to the public (hereinafter
referred to as “insurance companies”) and protect the legitimate rights and interests of investors
Article 2
When an insurance company formulates the prospectus for the initial public offering it shall follow the requirements as prescribed
in the present Provisions in addition to the general provisions on prospectuses and financial statements as prescribed by the CSRC.
Article 3
An insurance company shall at least disclose the risk factors as follows:
(1)
risks in the change of interest rates;
(2)
risks in the insufficiencies of price fixing and reserves that may be caused by the such premises as preconcerted interest rates,
preconcerted loss ratio, preconcerted additional rates, preconcerted return on investment adopted by the insurance company for determining
the premium rates of insurance products or various reserves;
(3)
operational risks, that is, the risks caused by imperfect or ineffective internal control or uncontrollable external conditions, for
instance: related risks in the loss of insurance agency institutions or marketing staff, risks in the abnormal surrender, risks in
the reputation loss of the insurance company resulted from that its staff or agents damage the interests of the insured, risks in
catastrophes, and risks in the reinsurance business and so on.;
(4)
risks in insurance frauds, that is, the risks resulted from that the policy holders, the insured, insurance agents, brokers or assessors
make false statements or hide important facts to the insurance company without following the principle of utmost good faith and violating
statutory duties;
(5)
risks of investment, that is, the risks resulted because the asset value of the investment portfolio of the insurance company reduces
or its investment portfolio fails to produce the expected profits;
(6)
risks in the non-matching of assets and debts, that are, the risks resulted from unfavorable influences to its solvency caused by
the non-matching of assets and debts of the insurance company ;
(7)
risks in the information system, that is , the losses to the insurance company or the unfavorable influences to its operational performances
owing to the failure of the information system to conduct normal business processing or data loss because the information system
can not operate normally or is not perfect;
(8)
policy risks, that is, the risks from the alteration of national policies, laws or regulations, for instance, the risks resulted from
the alteration of such policies as taxation or government supervision, etc.; and
(9)
other risks, namely, the risks faced by the insurance company besides those mentioned above.
Article 4
As for the disclosure of the basic conditions about the insurance industry of China, an insurance company shall, at least disclose
the following contents:
(1)
the overview about China’s insurance industry;
(2)
the characteristics and trends of developments of the insurance industry; and
(3)
the regulatory system and main laws and regulations of insurance industry.
Article 5
An insurance company shall at least disclose the following contents in accordance with its own conditions:
(1)
the market share of each primary insurance business conducted by the issuer;
(2)
primary advantages and disadvantages of the issuer in the market competition;
(3)
the development system, marketing personnel and network, and insurance agency conditions of the issuer and so on; and
(4)
the conditions on study and development of insurance products, and the main new products lately promoted, etc.
Article 6
An insurance company shall set up and disclose its internal control systems, which includes the control of businesses in sales, underwriting,
compensation granting, and reinsurance and so on; the control of budgets, expenditure management and financial statements and other
financial controls; the control of capital transfer, investment decisions, investment risk management and other capital control,
and the control of information technology and information safety management and other information technology control.
Article 7
An insurance company shall disclose its main insurance business categories and its development plans, and the principles and methods
for determining premium rates in accordance with the characteristics of its own business. For the individual insurance business,
the quantity of policyholders shall also be disclosed.
An insurance company shall disclose the composition of its premium incomes for the recent three years and the latest period in light
of different regions and main insurance business categories, and analyze the increase or decrease of premium incomes for different
regions and main insurance business categories, and the reasons for such changes.
An insurance company shall disclose the composition of compensations and commissions in light of main insurance business categories
and analyze the increase and decrease thereof and the reasons for such changes.
Article 8
By considering the characteristics of its own business, an insurance company shall disclose the types of reserves, principles and
methods for calculation of reserves, and shall, disclose the balance of various reserves for the recent three years and the latest
period in light of main insurance business categories, and analyze the changes thereof and the reasons for such changes. An insurance
company shall explain whether the reserves are sufficient by considering the characteristics of various reserves.
Article 9
In accordance with the relevant provisions of the CIRC, an insurance company shall, disclose the conditions about the solvency at
the end of each period for the recent three years and the latest period. The conditions about the solvency shall include but not
be limited to the actual amount of solvency, minimum amount of solvency and adequacy ratio of solvency.
In case the solvency amount and the monitoring indices of an insurance company for the recent three years and the latest period exceed
the normal scope, and for which any objection has been put forward by the insurance regulatory organ, the insurance company shall
disclose them and make corresponding explanations.
Article 10
An insurance company shall disclose related policies and its main business partners about the reinsurance business.
An insurance company shall disclose the amount of outward and inward payment of premiums, reinsurance reserves, and the reasons for
their changes for the recent three years and the latest period in light of main reinsurance companies, and disclose related conditions
about the major reinsurance matters still within the valid term And a separate disclosure shall be made in the case of any non-proportional
reinsurance contract including reinsurance of an excess of loss.
A reinsurance company shall disclose the reinsurance premium incomes and the ceded insurance premiums in light of main insurance business
categories.
A property insurance company shall disclose the policies for which it undertakes the major insurance liability at the end of the latest
period, and its reinsurance plans.
Article 11
An insurance company shall make disclosure of the main contents and accounting methods of financial reinsurance contracts for the
recent three years and the latest period, and their influences on the profits of the current period.
Article 12
By considering the provisions of the insurance regulatory organ, an insurance company shall disclose its investment policies, strategies,
portfolio composition and return on investment for the recent three years and the latest period, and their changes and trends shall
be analyzed.
In light of investment targets and investment purposes, an insurance company shall separately disclose its investment portfolio composition
for the recent three years and the latest period. The investments can be divided into bank deposits, government bonds, financial
bonds, corporate bonds, funds, stocks and other methods for using the capital if sorted according to the types of targets; and the
investments can be divided into financial assets, held-to-maturity investments, and financial assets available for sale, etc which
are measured at their fair value and of which the changes are recorded in the profits and losses of the current period if sorted
according to the types of purposes..
Article 13
For the initial public offering of securities, a life insurance company, health insurance company or pension insurance company shall
disclose the information about embedded value; and a financial or insurance group company that possesses any life insurance company,
health insurance company or pension insurance company shall disclose the information about embedded value for the related business.
An insurance company shall employ an external actuarial agency or actuaries to compile a report on embedded value in accordance with
the related provisions of the CIRC, and take the said report as the archival documents of the prospectus. The following statement
shall be made by the external actuarial agency or actuaries after the full text of the prospectus:
“This agency and our actuaries for signature have read the prospectus and its summery, and make sure that there is no conflict between
the prospectus and its summery and the report on embedded value issued by this agency. This agency and our actuaries for signature
have no objection to the contents of the report on embedded value quoted in the prospectus and its digest by the issuer, and guaranteed
that no false record, misleading statement or major omission may be resulted from the aforesaid contents in the prospectus, and shall
bear corresponding legal liabilities for the authenticity, accuracy and integrity of such contents.” The said statement shall be
affixed with the signatures of the actuaries for signature and the person in-charge of the actuarial agency and the seal of the actuarial
agency.
When disclosing the relevant information about the embedded value in the prospectus, an insurance company shall state that: “the embedded
value is the economic value based on a group of assumptions of future experiences and estimated in accordance with actuarial methods,
however, various assumptions as the basis of embedded value are uncertain, so the investors, when making investment decisions, shall
prudently use them. The information about embedded value shall include but not be limited to the following contents:
(1)
the embedded value at the end of the latest year and the results of the new businesses’ value of one year;
(2)
return ratio and risk discount ratio for calculation of embedded value and other main assumptions at the end of the latest year;
(3)
sensitive analysis results on the embedded value at the end of the latest year and the new businesses’ value of one year; and
(4)
the analysis of the change of embedded value at the end of the latest year.
Article 14
An insurance company shall disclose main accounting policies and accounting estimates as adopted within the reporting period by considering
the characteristics of insurance business, of which, the matters with direct relation to the insurance business shall at least include
the contents as follows:
(1)
detailed methods for confirming and calculating the premium incomes (reinsurance premium incomes are included) for main insurance
business categories;
(2)
accounting methods for outstanding loss reserves;
(3)
accounting methods for the undue insurance liabilities reserves;
(4)
accounting methods for the life insurance liabilities reserves;
(5)
accounting methods for the reserves for long-term health insurance liabilities; and
(6)
accounting methods for the whole reserves.
A reinsurance company shall pay more attention to the disclosure of the accounting methods for various reinsurance reserves.
Article 15
An insurance company shall disclose the information about its branches in accordance with the provisions.
If any branch is established abroad, an insurance company shall separately disclose the business operation situation of the overseas
branch.
Article 16
An insurance company shall disclose the composition of premiums receivable at the end of the latest year and the latest period in
light of the age of accounts. In case there are the arrears of any shareholder holding more than 5%(including5%) the shares of the
issuer in the premiums receivable, the explanations therefor shall be made.
Article 17
An insurance company shall disclose the amount of reinsurance debts receivable and payable at the end of the latest year and the
latest period in light of the classification of main reinsurance companies. In case there are the arrears of any shareholder holding
more than 5%(including5%) the shares of the issuer in the reinsurance debts receivable, the explanations therefor shall be made
Article 18
An insurance company shall separately disclose the long-term equity investment at the end of the latest year and the latest period
in light of the cost method and the equity method, and as for an important investment project, it shall disclose such information
as the starting date of investment, amount of initial investment, amount of final investment, proportion of its equity investment
to the equity of the invested party, and so on.
Article 19
An insurance company shall analyze and explain the alterations of commissions payable within the reporting period.
Article 20
An insurance company shall disclose the amount and interest rate of policy-pledged loans at the end of the latest year and the latest
period.
Article 21
An insurance company shall disclose the book balance of and the depreciation reserves for pending materials insolvent at the end
of the latest year and the latest period, and the recyclability thereof shall be analyzed.
Article 22
An insurance company shall disclose the calculating basis and amount of the reserves for capital bonds and insurance protection funds.
Article 23
An insurance company shall disclose such financial indices of the recent three years and the latest period as liquidity ratio, debt-to-asset
ratio, return on net assets, earnings per share, growth rate of retained premium, ratio of composite costs (for property insurance),
loss rate (for property insurance), and surrender rate (for life insurance).
An insurance company shall make explanations for the changes of the indices mentioned above for the recent three years and the latest
period, reasons for such changes and other related information.
Article 24
An insurance company shall, if it plans to use the raised capital for the establishment of a branch, disclose the amount of capital
required and the proposed location, etc. for the branch; and the specific investment direction may not be explained in case the raised
capital is used only to increase the principal; and the specific investment direction of the raised capital shall be disclosed in
detail in case the raised capital is used to upgrade the equipment, merger, acquisition or for any other purpose.
Article 25
An accounting firm that has professional actuaries, the experiences for audit of insurance companies, and the qualification to engage
in the securities and futures-related business shall be hired by an insurance company to audit its statutory financial statements
formulated pursuant to the rules and system of China for accounts and information disclosure in accordance with independent auditing
standers; and contents for audit shall also be added, and an international accounting firm that is specially accredited by the CSRC
and the Ministry of Finance shall be hired to audit its supplementary financial statements under the internationally universal rules
for accounts and information disclosure.
The main contents that need attention to be paid for supplementary audit include: the reserves for losses, and disposition of non-performing
assets significant off-balance-sheet items and their influences to the financial status and operational results; the asset quality,
profitability and operating risks of different clients, operating projects and operating areas; and the main differences between
statutory and supplementary financial statements.
The financial materials in the formal text of the prospectus shall be digested from statutory financial statements. Supplementary
financial statements shall be disclosed as the appendix of the prospectus so that the investors can refer to them for their judgment
of the financial status and investment risks of the insurance company.
Article 26
The present Provisions shall come into effect as of the promulgation date. The Rules for the Compilation of Information Disclosures
by the Companies Offering Securities to the Public (No. 3 and No. 4) – Special Provisions on the Contents and Formats of Prospectuses
of Insurance Companies (Zheng Jian Fa [2000] No. 76) and the Special Provisions on the Annotations to the Financial Statements of
Insurance Companies (Zheng Jian Fa [2000]No. 76) shall be abolished at the same time.
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