The National Financial Regulatory Administration (NFRA) has issued a new regulatory framework aimed at strengthening the oversight of insurance group consolidations, effective from 2 April 2025.
Under the new rules, all insurance group companies operating in China, including their domestic and international subsidiaries, must implement “consolidated management.” This includes establishing consistent systems across governance, finance, and risk oversight to identify and control group-wide exposures. The framework prioritises substance over form, requiring even indirectly controlled entities or those using the group’s trademark to be included in the consolidated management scope.
The NFRA says it may intervene to adjust the scope of consolidation based on changes in equity structure or governance risks. Insurance groups are also expected to simplify complex shareholding structures, reduce excessive layering, and avoid unclear reporting lines. Groups must also designate a lead department to coordinate internal functions and ensure policies are integrated across member companies, the regulator said.
To strengthen corporate governance, the measures outline clear responsibilities for boards and senior management, who must formulate and enforce group-wide consolidation policies. Internal audits must be conducted at least every two years, and external audits should be performed by the same institution whenever possible to ensure consistency.
The rules also impose strict risk management obligations. Groups are required to set an overall risk appetite, establish capital adequacy plans, conduct stress testing, and monitor cross-border, cross-industry, and cross-entity risks. Liquidity risk must be actively managed, with provisions for emergency financing and intervention if a member company exhibits signs of instability.
On intra-group transactions, the NFRA mandates detailed monitoring and control policies to prevent regulatory arbitrage, fictitious transactions, or risk transfer through complex structures. Prohibited practices include using controlling positions to benefit one entity at the expense of others or providing intra-group guarantees that violate prudential norms.
Insurance groups must also maintain clear boundaries between member entities to avoid risk contagion. This includes isolating customer data systems, ensuring financial independence, and avoiding confusion in cross-selling activities that could blur legal responsibilities.
Regulatory reporting requirements have been reinforced. Groups must file quarterly and annual consolidated management reports, with prompt disclosure of any major structural or risk-related events. The NFRA may conduct on-site inspections, and non-compliance could result in supervisory actions or administrative penalties.
These new measures repeal the 2014 guidelines issued by the former China Insurance Regulatory Commission and represent a significant step in the evolution of group-wide regulatory oversight in China’s insurance sector. They also follow earlier NFRA guidelines released in January 2025, which outlined protocols for insurance groups to enhance risk management and maintain operational stability.
