Laws of the People's Republic of China

Circular of the State Administration of Foreign Exchange on Relevant Issues about the Adjustment of Foreign Exchange Policies on Part of the Insurance Businesses

Hui Fa [2006] No. 23 May 23, 2006

The branches and foreign exchange management departments under the State Administration of Foreign Exchange (SAFE) in all provinces, autonomous regions, and municipalities directly under the Central Government, the branches in the cities of Shenzhen, Dalian, Qingdao, Xiamen and Ningbo; all designated Chinese-funded foreign exchange banks, and all insurance companies,

For the purpose of facilitating the operation of insurance companies, and promoting the development of the insurance industry, the SAFE determines to adjust the provisions on foreign exchange management on part of the insurance businesses, and makes the following circular on relevant issues:

I.

The domestic insurance company that operates foreign exchange insurance business upon approval (including Chinese-funded insurance companies, Sino-foreign joint venture insurance companies, solely foreign-funded insurance companies and the branches of foreign insurance companies) and its branches (hereinafter referred to as the "insurance operation institutions") shall make the following adjustment on the foreign exchange policy for the insurance contracts which comply with the conditions prescribed in Articles 33 and 34 of the Interim Provisions on Foreign Exchange Management of Insurance Business (Hui Fa [2002] No.95), and are valued and compensated with foreign exchange:

1.

The provisions that insurance operation institutions shall collect insurance premiums in foreign exchange shall be adjusted as: the insurance operation institutions may choose Renminbi or foreign exchange in collection of insurance premiums, but shall not collect foreign currency cash.

2.

The provisions that insurance operation institutions may pay compensations or reimburse insurance money with their self-owned foreign exchange shall be adjusted as: the insurance operation institutions may pay insurance money from their foreign exchange accounts or pay it by purchasing foreign exchange at the designated foreign exchange banks on the strength of the relevant insurance contracts and claims computation letters.

II.

The domestic insurance operation institutions or insurance assets management companies may, upon the need of operation, make conversion between foreign currencies at designated foreign exchange banks to adjust the kinds of their foreign exchange currencies.

III.

The restrictions on the purchase of foreign exchange by domestic insurance companies for handling overseas reinsurance ceding business shall be cancelled. When dealing with overseas reinsurance ceding business of domestic insurance according to the relevant provisions of the China Insurance Regulatory Commission, the domestic insurance operation institution that undertakes foreign exchange reinsurance business upon the approval of SAFE or its branch administrations may make the payment of foreign exchange directly or through purchasing foreign exchange at the designated foreign exchange banks in accordance with the actual need of operation and upon the strength of the reinsurance contract, reinsurance policies or reinsurance lists of payment and other effective credences.

IV.

In accordance with the Notice of the State Administration of Foreign Exchange on Relevant Issues concerning the Submission of Foreign Exchange Regulatory Statements on Insurance Business (Hui Fa [2003] No.27), the domestic insurance operation institutions shall fill in the Statistical Forms for Foreign Exchange Insurance Business of Insurance Companies, and shall, in the column of "remarks", specify the information on the payment of foreign exchange for overseas reinsurance business of the last quarter. If they make the payment by purchasing foreign exchange, they shall list the relevant amount of foreign exchange purchased, time of purchase, and other contents.

V.

The present Notice shall enter into effect as of June 1, 2006. If there is any conflict in the previous provisions with this Circular, the latter shall prevail. The Notice of the State Administration of Foreign Exchange and the China Insurance Regulatory Commission on Relevant Issues concerning the Sale and Payment of Foreign Exchange for Overseas Reinsurance Ceding Business (Hui Fa [2003] No.75) shall be abolished simultaneously.

After this Circular is received, each branch administration shall forward it to the insurance companies and foreign-funded banks within its jurisdiction as soon as possible. Each Chinese-funded designated foreign exchange bank shall forward it to its subordinated branches and subsidiaries as soon as possible. If any problem is encountered in the implementation, please feed back to the State Administration of Foreign Exchange in time.

Contact Telephone: 010-68402381

Fax: 010-68402272