China: Related Party Approval requirement removed by CIRC
The China Insurance Regulatory Commission (CIRC) has removed the requirement to obtain related party approval to participate on the LICCL platform.
All current and new syndicates of Lloyd’s Insurance Company (China) Limited (LICCL) are required to obtain related party approval in order to participate on the LICCL platform. This is because reinsurance retrocession from LICCL to Lloyd’s syndicates is treated by CIRC as related party transactions.
This requirement applies to all foreign (re)insurers with similar arrangements operating in China. It requires syndicates to provide detailed material for the CIRC to consider, such as net profits from the last three financial years and fulfilment of solvency requirements under its domiciled jurisdiction, in order to be approved on annual basis to transact business with LICCL.
However, on 21 April 2015 the CIRC formally announced that the related party approval process is no longer required for foreign reinsurers, including Lloyd’s syndicates. All approval criteria, including the three year net profit requirement, have been abolished for both existing and new participants on the platform.
Instead, as the reinsurers or retrocessionaires, syndicates will be required to follow the reinsurance registration process announced by the CIRC on 31 March 2015. This mandatory registration process will come into effect from 1 January 2016. Among other requirements, it will require Lloyd’s, Lloyd’s syndicates who plan to write China business and the LICCL to be registered, and supply certain information.
LICCL and Lloyd’s are working with the CIRC to determine how the reinsurance registration process will apply to the Lloyd’s market, and will be participating in user acceptance testing for the registration system later in the year.
LICCL will register as a Chinese incorporated insurer, and the intention is for LICCL to refer all Lloyd’s syndicates to the CIRC for registration. Once successful, this referral will remain valid for three years. Utilising LICCL for the referral process will help Lloyd’s to manage the process efficiently, and track re-referral dates.
Lloyd’s intends to undertake the registration process on behalf of all syndicates – including incidentals, special purpose vehicles and new syndicates as they commence trading. As with the similar registration process in India, Lloyd’s will work with each Managing Agent to collate the information required, which will be a combination of Lloyd’s level and Syndicate specific information.
Currently, Lloyd’s expects system testing to commence in July, and so would expect the registration process to occur during Q3/Q4 in readiness for the effective date. Further details of the information required and the process for collation, review, confirmation and registration will be issued once finalised and agreed with the CIRC.
The information held in the system must be reviewed each quarter, and significant events reported within 15 days of their occurrence. Once again, further details will be issued in due course.
Syndicates can elect not to be registered, but any syndicate not registered will be barred from assuming reinsurance business from Chinese cedants.