The China Insurance Regulatory Commission (CIRC) issued the Consultation Paper on draft rules governing insurers' independent directors (Consultation Paper) on 26 December 2017.
Key points of the Consultation Paper are:
- It is recommended that the board of directors of all CIRC-regulated insurers (Insurers) is comprised of at least two independent directors, and that in any event the total number of independent directors comprises at least one third of all directors on an Insurer's board. Further, where an Insurer has a single controlling-shareholder, then at least one half of such Insurer's board of directors should be independent directors, excepting that where such single controlling-shareholder is itself either an Insurer or an insurance holding company, in which case an application may be made to CIRC for a waiver of this specific requirement.
- Any single shareholder, or group of affiliated shareholders or shareholders otherwise 'acting-in-concert', that individually or collectively hold more than one third of an Insurer's shares, are prohibited from nominating independent directors to such Insurer's board. This prohibition does however not apply to shareholders who are themselves either insurance holding companies or Insurers.
- In principle, an independent director shall not serve on an Insurer's board for more than six consecutive years. Further, any person that has served as an Insurer's independent director for six consecutive years (Term Independent) may not, for a period of 3 years following the end of such six year consecutive term, declare themselves a candidate for an independent directorship with that same Insurer's board of directors. However, where an Insurer formally notifies CIRC in advance, then such Term Independent may indeed nominate as a candidate for a further and consecutive term as an independent director of such Insurer, provided such further and consecutive term is no longer than 3 years.
- On or before 30 April of each year, all independent directors of Insurers are individually and personally obligated to file, via email, a report with CIRC itemising, among other things, (i) all material issues and risks encountered by the independent director during his/her directorship in the areas of that Insurer's corporate governance, management and operations; (ii) obstacles encountered by the independent director in performance of his/her duties; and (iii) proposals and suggestions for CIRC.
The links to the full China newsletter (January 2018 edition) and other articles in this newsletter can be found below: