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China eases restrictions on reinsurance placements

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BEIJING--Insurers in China will have more freedom to choose reinsurers under changes to the country's insurance law.

A revision to the law passed earlier this month by the Standing Committee of the National People's Congress removes a requirement that insurers place at least 20% of their business with reinsurers based in China. Reinsurance written within China is placed with China Re, the state-owned company that is the country's sole domestic reinsurer.

The amendment is effective Jan. 1, 2003.

The revision to China's insurance law is intended to comply with the country's commitment for acceptance into the World Trade Organization. That commitment called for the 20% reinsurance requirement to be abolished at least by the fourth year of China's accession into the WTO. China's Insurance Supervisory Authority will adopt procedures regarding the purchase of reinsurance that will be in place until that deadline.

As China's insurance market grows, foreign reinsurers are making moves to operate there and some have been granted preliminary approval to write business in China.

The revised law also puts in place policyholder protections by making insurers liable for claims even if a broker exceeds its authority in placing the coverage.

And, the China Insurance Regulatory Commission is directed to establish criteria for the supervision of solvency of insurers.