On November 6, the National Financial Regulatory Administration issued the Measures for the Administration of the Qualification of Directors, Supervisors and Senior Executives of Insurance Companies (Draft for Comments), soliciting public feedback. The draft consists of six chapters and 66 articles, improving institutional arrangements around qualification requirements, qualification approval and reporting, supervision and management, and legal liability, while further refining the requirements for independent directors and compliance positions and strengthening constraints on past performance of duties and current conduct.
This revision represents a comprehensive overhaul of the Provisions on the Administration of the Qualification of Directors, Supervisors and Senior Executives of Insurance Companies issued by the former China Banking and Insurance Regulatory Commission in 2021, with the number of articles increasing from 56 to 66. Notably, the draft adds qualification requirements and prohibited admission circumstances for independent directors, while the "negative list" for qualification has been expanded from the current 15 items to 18 items, explicitly including as grounds for denying qualification approval those who "bore direct responsibility or leadership responsibility for illegal or irregular operations or major losses at a previously held institution, where the circumstances are serious."
New Requirements Added for Independent Directors
Regarding basic conditions, the draft specifies that directors, supervisors and senior executives of insurance companies shall uphold integrity, fulfill their duties diligently and practice honestly, shall not use their positions to seek illegal benefits, and shall not harm the lawful rights and interests of financial consumers. It also incorporates into the qualification requirements a sound economic and financial employment record, stable personal and family finances, and the fulfillment of fiduciary and diligent obligations.
Independent directors are a key focus of the refined qualification requirements. Compared with the 2021 provisions, the draft adds clauses on independent directors, requiring that in addition to meeting the qualification requirements for directors, they shall have more than five years of work experience in management, finance, accounting, banking, insurance, actuarial science, investment, risk management, auditing, law or related fields, and possess the time and energy necessary to perform their duties.
Regarding independence, the draft lists six circumstances under which a person may not serve as an independent director of an insurance institution. These include persons who have worked at shareholder units holding more than 5% of shares or among the top 10 shareholders within the past three years, as well as their close relatives and primary social connections; persons who have worked at the insurance institution or enterprises actually controlled by it within the past three years, as well as their close relatives and primary social connections; persons who within the past year served as senior executives, partners or controlling shareholders at banks, law firms, consulting firms, auditing firms or other institutions that have business dealings with the insurance institution and its controlling shareholders and their respective affiliates; and persons serving at other insurance institutions with the same main business.
Qualification requirements for compliance positions have also been refined. The draft includes the chief compliance officer of the head office and compliance officers of provincial branches within the scope of senior executives and specifies their qualification requirements separately. Among these, the chief compliance officer must have a bachelor's degree or above and meet one of three conditions: more than eight years engaged in financial work with more than three years in legal compliance work; more than eight years in legal compliance work with more than three years in financial work; or more than eight years in financial work with a legal professional qualification certificate. The draft also sets corresponding arrangements for general managers concurrently serving as chief compliance officers and provincial branch general managers concurrently serving as compliance officers, who under the provisions do not need to separately obtain qualification approval for the relevant compliance position.
Some work experience requirements continue the current provisions. The chairman shall have more than five years of financial work experience, or more than 10 years of economic work experience including no fewer than three years of financial work experience, and directors and supervisors shall have more than five years of commensurate work experience. This revision does not simply raise the years of experience required for all positions, but rather further refines professional conditions and performance requirements.
No Promotion Within One Year of Administrative Penalty
Regarding admission constraints, the draft lists 18 circumstances under which qualification approval shall not be granted, an adjustment from the current 15 items. These include: bearing direct or leadership responsibility for illegal or irregular business activities or major losses at a previously held institution, where circumstances are serious; causing major losses or adverse impact due to violations of professional ethics, conduct or serious dereliction of duty; and instructing or participating in a previously held institution's non-cooperation with lawful supervision or case investigation. The draft further focuses on the responsibility of proposed appointees in past business activities and sets clear conditions regarding responsibility, circumstances or consequences, which cannot be equated with ordinary business losses constituting an obstacle to appointment.
Regarding debt, the scope of restriction has been expanded from the individual to the individual and spouse, specifically targeting debts of a relatively large amount that remain unpaid upon maturity.
In addition, the supervision and management chapter contains several new provisions. For example, it specifies that regulatory authorities may supervise and inspect the performance of duties by insurance companies and their directors, supervisors and senior executives through on-site inspections and off-site supervision; where there are illegal or irregular acts, regulatory authorities may issue risk warning letters, conduct regulatory talks, take regulatory coercive measures or impose administrative penalties on directors, supervisors and senior executives bearing direct or leadership responsibility.
The draft specifies that where an insurance company receives a decision from a regulatory authority to revoke or cancel the qualification of a director or senior executive, it shall immediately terminate the relevant person's corresponding position. Those whose qualification has been cancelled or revoked due to illegal or irregular acts shall not be reassigned to a position of equivalent or higher rank during the execution period. Where incumbent directors and senior executives have not had their qualifications cancelled or been subject to market entry bans, but have received administrative penalties such as warnings, public censure or fines from regulatory authorities or other financial management departments, they shall not be appointed to a higher position within one year from the date the penalty decision is made.
Comments