The China Insurance Regulatory Commission (CIRC) recently issued the Circular on Issuing the Information Disclosure Standards for Insurance Companies on the Use of Funds No.4: Large Investments in Unlisted Shares and Large Real Estate Investments (Information Disclosure Standards No. 4) on 4 May 2016, which took effect on the same day.
Purposes and aims
In the wake of the information disclosure standards No. 3 for the acquisition of listed company's shares which was issued in December 2015, the Information Disclosure Standards No. 4 was promulgated with aims to further regulate the information disclosure obligations of insurance groups, insurance companies and insurance asset management companies on their investments in equities of unlisted companies and real properties in and outside of China.
It is an important step taken to further implement the strategies adopted by the State Council to improve market-oriented administration, strengthen the proactive and responsive supervision, and prevent investment and operational risks of the insurance companies.
The Information Disclosure Standards No. 4 is an integral part of information disclosure framework and risk-control policy system for the use of insurance funds. It aims to facilitate the monitoring and supervision of the market and players in a timely manner and improve the transparency and compliance of large-scale investments using insurance funds.
Thresholds for information disclosure
The insurance companies should disclose investment information according to the Information Disclosure Standards 4 where:
- The total investment amount in the equity of a single unlisted company (whether onshore or offshore) exceeds RMB 3 billion (or the equivalent in foreign currencies);
- The total investment amount exceeds RMB 5 billion for any direct investment in onshore real estate property or investment in the form of real rights in a single offshore real estate property; or
- The cumulative amount of equity investment in a single offshore real estate property exceeds RMB 1 billion.
Information required for disclosure
The following information is required to be disclosed by the insurance companies once the disclosure obligations are triggered:
- The name of the invested enterprise / real property and the estimated investment amount; the amount and sources of all external financing for offshore investments;
- The proportion of the investment / offshore investment in the total assets of the insurance company at the end of the last quarter;
- The name and investment amount of the affiliated enterprise or persons acting in concert (if applicable) in the investment;
- The solvency margin ratio of the insurance company at the end of the last quarter; and
- Other information requested by the CIRC.
The following additional information should also be disclosed when the insurance companies are making large real estate investments:
- The location and development status of the real estate project;
- The form of investment (i.e. real rights or equity rights); and
- The name, registered capital, total assets, net assets and main business of the project company and proposed shareholding in such project company (applicable to equity investment)
Timeline and platform of disclosure
Except for information relating to state secrets or that has already been disclosed by the listed companies in accordance with applicable disclosure requirements, the insurance companies should disclose the required information on their official websites, and the websites of the Insurance Association of China, the Insurance Asset Management Association of China and other information disclosure platforms designated by the CIRC, within 10 business days after signing the investment agreements.
The insurance companies should continue to disclose the sources of their investment funds (i.e. self-owned funds, insurance reserves or other funds) within 10 business days following the actual investment. Any material changes to the disclosed information are required to be further disclosed within 10 business days following such changes.