ABSTRACT
Under the planned economy, which had been implemented for more than 40 years, all problems could be solved by the government of the State. When a certain enterprise suffered serious losses due to natural calamities or accidents, the government could, by virtue of its power, concentrate the materials of certain districts or even the whole country for remedial action so as to recover its production and assist the return to daily life. Under such a system, the function of insurance is not obvious. However, under the system of a market economy, the government is not entitled to interfere with the production or activities of management; the deficits of individual enterprises shall be borne by the enterprises themselves. Only at this stage do the role and function of commercial insurance become evident. In order to protect the construction of the market economy, it is imperative to develop
commercial insurance. Against this background, the first Insurance Act was issued in 1995. In this sense, the introduction of the Insurance Act constitutes one of the important milestones showing that the economic system of China has been turned towards the direction of a market economy. However, at the time when the Insurance Act 1995 was promulgated, China was at the initial stage during which the economic system was being transformed from a planned economy. Furthermore, China was at that time not a member of the WTO and its market (including the insurance market) had not been opened to the outside world. For this reason, some imprints of the old period would unavoidably feature in the law. In 2001, China accessed the WTO, and in that connection the Chinese government made certain commitments in the Accession Protocol. In order to meet those commitments and to effect normalisation in the management of the market, the ‘Regulations Regarding the Management of Foreign Capital Insurance Companies’ (the ‘Regulations’) were issued by the State Council on 12 December 20012 and on 13 May 2004, the ‘Rules for the Implementation of the Regulations’ (the ‘Rules’) were issued by the China Insurance Regulatory Commission under the authorisation of the State Council. The Rules provided a fully detailed legal basis for foreign insurance companies’ accession to the market of China.
