China Proposes Broad Overhaul of Insurance Law to Tighten Governance and Expand Fund Use

China's National Financial Regulatory Administration (NFRA) has published a comprehensive draft revision of the PRC Insurance Law for a 30-day public consultation. The proposal represents the first major overhaul of the statute in over a decade, significantly raising market-entry barriers by lifting the minimum registered capital for insurers from 200 million yuan to 1 billion yuan. The draft introduces strict look-through supervision to hold actual controllers legally accountable, explicitly prohibits eight types of shareholder misconduct, makes asset-liability management a statutory requirement, and broadens the scope of permissible insurance fund investments to include commodities and derivatives.

The overhaul marks a shift from reactive micro-level conduct checks to a systemic, risk-oriented prudential framework. By raising capital thresholds and establishing direct statutory authority over actual controllers, regulators aim to permanently block the channel where controlling shareholders use hidden related-party transactions to siphon insurance reserves. Simultaneously, opening asset classes to equities, commodities, and derivatives gives insurers the flexibility needed to act as long-term institutional capital amid shifting macroeconomic conditions.

China's National Financial Regulatory Administration has unveiled a comprehensive draft revision of the Insurance Law, initiating a one-month public consultation on what would be the statute's most substantial restructuring in more than a decade, according to official notices and state media reports. Originally enacted in 1995 and amended in 2002, 2009, 2014, and 2015—the latter two being limited technical adjustments—the law had increasingly fallen behind market developments. The drafting explanation noted that the rapid growth and rising complexity of China's insurance sector required closing institutional gaps, enhancing regulatory effectiveness, and preventing systemic financial risks. A central focus of the draft is strengthening look-through oversight over major shareholders and actual controlling parties. The proposal raises the minimum registered capital threshold for establishing an insurance company from 200 million yuan ($28 million) to 1 billion yuan. Regulators will be legally mandated to scrutinize capital sources, financial health, capital replenishment capacity, and integrity records of controlling entities. The draft establishes specific prohibitions covering eight categories of shareholder conduct, including illegal interference in daily operations, circular capital contributions, sham investments, and equity proxy holding structures. Legal experts highlighted the practical significance of these governance provisions. Wu Yiwen, a law professor at Wuhan University, noted in domestic media coverage that the draft equips regulators with statutory authority to supervise shareholder conduct throughout an institution's life cycle, resolving historical enforcement blind spots where nominal shareholders were traceable but shadow controllers were not. Bai Feipeng, legal director at PICC Group, observed that the inclusion of targeted administrative penalties and compulsory measures will drastically increase the cost of regulatory violations. Beyond shareholder governance, the draft formalizes prudential requirements by making asset-liability management a mandatory statutory duty rather than merely an administrative guideline. To assist insurers in operating as 'patient capital,' the draft also widens the legal parameters for insurance fund allocation. Building on traditional channels such as bank deposits, securities, and real estate, the revision explicitly permits investments in unlisted equities, asset management products, asset-backed securities, commodities such as gold, as well as participation in futures and financial derivatives. Finally, the draft updates risk resolution and market exit procedures. According to legal scholar Yue Wei of Nanjing University, the text creates a coordinated ladder of early intervention, statutory takeover, restructuring, and bankruptcy liquidation, while clarifying the legal standing and deployment rules of the Insurance Security Fund to protect policyholders.