February 5, 2018

On January 22, 2018, the 2018 National Conference on Insurance Supervision was held in Beijing. The Conference reviewed the results of various insurance supervisory programs in 2017, and issued the major plans for 2018 and the strategic direction of insurance supervision for the near-term.

The Conference recognized the tremendous challenges before the China Insurance Regulatory Commission (CIRC) in 2017. Confronted by the complex economic and financial climate home and abroad, as well as the disruptive effects on the industry brought by Xiang Junbo’s illegal conduct and disciplinary breach, the CIRC system stayed resolute and composed in implementing the decisions of the CPC Central Committee and the State Council, responding to risks, strengthening party discipline, and eliminating the negative influences of Xiang Junbo. By taking effective measures, the system achieved notable results in preventing risks, combating improper business practices, addressing regulatory deficiencies, and supporting China’s real economy. In particular, the CIRC system: (1) steeled itself with Xi Jinping Thought and the directives of the 19th CPC National Congress and applied them in insurance supervision to ensure that its initiatives were heading in the right direction; (2) eradicated the negative influences of Xiang Junbo, comprehensively addressed the prominent issues in party governance and discipline after an in-depth review, and strengthened the central leadership role of the party in insurance-related programs to eliminate the underlying factors that caused the incident; (3) in accordance with the four notices (No. 34, 35, 40, 44) and one guidance (No. 42) released in 2017 (“‘1+4’ Series”), fully committed to preventing market risks, combating improper business practices, and supporting the real economy, with various programs making steady progress; and (4) by aligning with the directions of the CPC Central Committee and eliminating deficiencies, accelerated internal transformation and the building of a supervisory system that better copes with the evolving insurance sector in the new era.

The Conference acknowledged the immense solidarity, drive, and effort of the entire CIRC system, under the leadership of the CPC Central Committee and the State Council, to brave through the challenges and make progress – sectoral risks were kept in check; the comprehensive solvency adequacy ratio for the whole insurance sector was 252%; incremental risks were under effective control; risk resolution was competently handled; and no systemic risk occurred. These efforts helped tackle, to various extent, the disorderly conduct in the market, deficiencies of insurers, aggressive or irrational investment activities including those involving overseas acquisitions, and improper business conducts. The regulatory system was also improved and strengthened in 2017 by the amendment of 26 ministry-level rules and normative documents. Furthermore, the initiative on steering capital back into the real economy was bearing fruit, with the insurance industry providing RMB 4,154 trillion of risk protection nationwide, up 75% year-on-year; investment activities shrank significantly; and general life insurance accounted for 47.2% of the premium in the life insurance segment, an increase of 11.1 percentage points. The insurance market maintained its growth momentum in 2017, recording RMB 3.66 trillion in total premium, RMB 256.72 billion in expected profits for insurers, and 17.5 billion in total number of policies written, an increase of 18.2%, 29.7%, and 84%, respectively, and striking a balance between growth rate and growth quality and profitability.

The Conference noted the significance of the 19th CPC National Congress’ recognition that the Chinese socialism had entered a new era and that the chief source of social tension had become the people’s growing need for a better life on the one hand, and the uneven and inadequate economic development on the other. Similarly, China’s insurance sector also welcomes its own new chapter, and the principal issue is now between the soaring demand for more sophisticated insurance products and the unevenness and inadequacy of the current market supply. Auspiciously, the insurance sector is also operating in an environment more favorable than ever before: The newly established Xi Jinping Thought has given unprecedented clarity to the roadmap of the insurance sector; and the strategic goal set during the 19th CPC National Congress, which called for building China, by 2050, into a “modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful,” required both insurance to become a necessary condition for a happy life as well as redoubled confidence and resolve of the CIRC system in strengthening insurance supervision. At the same time, the challenges confronting the insurance sector in this new context are now interwoven with legacy issues, and insurance supervision in China is still being rebuilt and enhanced, requiring the CIRC system to remain vigilant in preventing crisis and risks.

It was stressed at the Conference that the proclamation at the 19th CPC National Congress – that China has entered a new phase of Chinese socialism and that China is “closer, more confident, and more capable than ever before of making national rejuvenation a reality” – would serve as the fundamental goal of insurance supervision. While China as a whole works toward this historical target and toward achieving a higher-quality economic development, the insurance sector will also be tasked with a difficult but noble undertaking itself, which is to build a modern insurance service industry for the new era that is appropriate for this new phase of economic development and well-aligned with Two Centenary Goals and, especially, with the goal of shaping China into a modern socialist country by the centenary of the nation. To that end, the insurance sector has to play a leading and pivotal role in safeguarding financial security, supporting the real economy, strengthening social safety net, and dispersing social risks; and these will be the focus of insurance supervision in the foreseeable future.

The Conference noted that 2018 would mark the beginning of China putting into action the guiding principles of the 19th CPC National Congress as well as the 40th anniversary of China’s reform and opening up policy, and, therefore, better insurance supervision would be of special importance this year. The guiding principles for insurance supervision in 2018 are: (1) to unite more closely around the CPC Central Committee with Xi Jinping as the core and implement the directives of the 19th CPC National Congress, the National Financial Work Conference, and the Central Economic Work Conference under the guidance of the Xi Jinping Thought; (2) to strengthen party discipline with the goal of improving the quality of life of the general public; (3) to better support the Three Tough Battles of preventing and resolving major risks, conducting targeted poverty alleviation, and controlling pollution, and seek steady and solid progress; (4) to carry out the Three Major Tasks of supporting the real economy, managing financial risks, and intensifying financial reforms; and (5) to follow the leadership of the State Council’s Financial Stability and Development Committee, and protect insurance consumers, expedite the formation of a modern insurance service industry for the new era, and build a new model of insurance supervision.

The Conference further noted that the success of insurance supervision in 2018 hinges on the following factors: (1) uphold the central leadership of the CPC Central Committee and the guidance of the Xi Jinping Thought; adopt a people-centric development strategy; ensure that fundamentally the insurance industry is to provide protection to the insured and that insurance supervision is to better regulate market conducts; and follow and implement the directions laid out in the “1+4” Series documents; (2) enhance risk prevention and mitigation; further prioritize risk prevention and control; and, through combining risk prevention with diversion and eliminating both the symptoms and root causes, strive to in three years markedly prevent, mitigate, or resolve the risks in the insurance sector and improve the capacity and capability of the whole industry (with focus on key business segments, companies, and areas) to prevent risks; (3) using the reconstitution of the insurance supervision system as an opportunity, conduct rigorous market supervision with focus on such prominent risk areas as the use of equity, capital, and insurance funds and such key business segments as agricultural insurance, the intermediary market, and internet insurance; conduct thematic inspections to rectify disorderly market conducts; strengthen the protection of insurance consumers; and intensify the effort against illegal activities, rule violations, and disorderly market conducts and enhance deterrence; (4) intensify insurance reforms to make the market more accessible to foreign players, remedy deficiencies, strengthen the regulatory system to target vulnerable areas, and enhance the sophistication of insurance supervision and the sustainability of the insurance sector; and (5) with a view to steering the insurance sector back to its roots, focus on contributing to China’s targeted poverty alleviation and pollution reduction campaigns and the supply-side structure reform; and enable the funds and protection offered by the insurance sector to better support the modernization of China’s economic and social system.

It was stressed at the Conference that party building would be essential for completing historical missions including the Three Tough Battles, Three Major Tasks, and the building of a modern insurance service industry for the new era. The CIRC system, therefore, should (1) bolster the leadership role of the party and enhance or implement Four Consciousnesses, Four Confidences, and Four Subordinations to strengthen the party and to more effectively resolve major challenges, risks, resistances, and conflicts; (2) vigorously strengthen the party organization within the CIRC system, promote the central leadership role of the CPC Central Committee, and ensure that the insurance industry is on the right path; (3) restore the integrity of the political ecosystem by eradicating the negative effects of Xiang Junbo, reinforcing the previously breached disciplines, correcting distorted understandings and values, and repairing misguided party and political mentalities and practices; (4) significantly promote better conduct by making 2018 the “Year of Better Conduct” for the CIRC system and conducting in-depth surveys to ensure theoretical studies have practical applications, efforts yield real results, and staff members lead simple lives; (5) comprehensively strengthen the leadership team and strive to cultivate a team of politically resolute, ethically disciplined, and professionally competent insurance supervisory personnel; and (6) improve party conduct and governance integrity and combine forceful responses, high pressure, and long-term deterrence with a “leave no stone unturned” and zero tolerance altitude to contribute to a landslide victory against corruption.