Jennifer K. Mailander on China's Circular 91
In November, 2001, China was approved as a full member of the World Trade Organization (WTO). As part of its acceptance into the WTO, China agreed to adopt measures to better define and regulate practices within the insurance industry. To fulfill these requirements, China has revised and adopted several insurance-related laws, regulations, and guidelines. The most recent of these was issued on September 7, 2007 when the China Insurance Regulatory Commission (CIRC) released Circular No. 91.
In this Expert Commentary, Jennifer K. Mailander discusses Circular 91, which is entitled Circular of China Insurance Regulatory Commission concerning Printing and Distributing the Guidelines for the Compliance Management of Insurance Companies.
Mailander first outlines the basic compliance framework of Circular No. 91. She addresses the definitions for key terms such as “compliance,” “compliance risk,” and “compliance management.” The author writes: “While the Guidelines state that “Everybody is responsible for compliance,” the concept of Compliance being enforced and supported from top level of management down is a theme that is repeated throughout the Guidelines.”
The author emphasizes that the largest portion of the Guidelines is focused on the responsibilities of the Compliance Chief and Compliance Department, detailed in Chapter III. The author writes: “While ultimate liability for compliance management lies with an insurance company’s board of directors, the Compliance Chief and Department have overall day-to-day responsibility for compliance within the company and its branches. This responsibility ranges from “setting down and revising” compliance policies to training, to “monitoring, identifying, evaluating and reporting compliance risks.”
This commentary also details Circular 91’s reporting, review and evaluation requirements and discusses how the Guidelines require extensive reporting, reviews and evaluations to be performed throughout all levels of an insurance company. The author writes: “There are at least 14 separate discussions on reporting, reviews and evaluations to be performed. It’s easy to see how this could quickly become a bureaucratic nightmare with so many requirements, but very few explanatory details as to the ultimate goal of the reporting, review, or evaluation.”
The author concludes: “The compliance framework and reporting requirements described in the Guidelines are quite detailed and seem to establish fairly thorough processes. However, process can only take a company or country so far. It is one thing to write detailed instructions on a compliance structure and reporting requirements. It is quite another to actually implement, integrate, and actually live the concept of compliance. A culture of compliance needs to be developed at the company level, the industry level, and the country level and this will take time.”
Readers may purchase the full text of this Expert Commentary here.