Dear Insurance Working Group member,
We are happy to invite you a meeting of the Insurance Working Group on Tuesday 21st August, starting at 4pm in our Shanghai office.
This meeting will be focused on the impact of recent CIRC guidelines on employee remuneration for insurance companies, as detailed below and in a full English translation attached courtesy of HSBC Life Insurance. The Working Group is proposing to discuss an engagement strategy with CIRC on the guidelines and, in particular, we would request that the heads of HR of insurance companies are invited to attend this meeting. Please help forward this invite to the relevant person within your organisation if it is not you.
To register to attend, please send notification to Ms. Erxi Sun at esun@europeanchamber.com.cn in advance of the meeting.
Policy details
On 19th July 2012 China Insurance Regulatory Commission (CIRC) release of the Guidelines on Remuneration Administration Regulations for Insurance Companies (the Guidelines) for trial implementation, which will take effect from 1 January 2013.
This is the first time that CIRC has tried to administrate the remuneration mechanisms of insurance participants. According to CIRC, improper remuneration mechanisms causing the excessive risk taking of financial institutions is deemed as one of the major reasons for bringing about the financial crisis in 2008. In fact, CIRC is not the first financial regulator in China to propose the remuneration administration, with the China Banking Regulatory Commission (CBRC) previously issuing a similar policy for banks.
The Guidelines will apply to insurance participants (the Insurance Participants) such as insurers, insurance group companies, and insurance asset managers which are registered in China. According to CIRC, the key objective to issue the Guidelines is to administrate the remuneration of senior management personnel and key position personnel of the Insurance Participants. It, however, raises major concerns from most Insurance Participants, in particular foreign invested insurance companies.
The key terms with respect to the remuneration of senior management personnel and key position personnel of the Insurance Participants include:
· the performance payments of director, supervisors and senior managers of an Insurance Participant shall be determined on the basis of the outcome of their performance appraisal for the current year, and the performance payment shall be no more than 3 times of basic salary of the said personnel;
· the cash benefits, allowance and subsidies annually offered by the Insurance Participants to directors, supervisors and senior managers shall not exceed 10% of their basic salary;
· the performance payments of directors, supervisors, senior managers and key position personnel of an Insurance Participant shall be paid in a deferred way, and the proportion of deferred payment shall be at least 40% (while as for chairman and general manager, the proportion of such deferred payments shall be at least 50%); and
the Insurance Participants shall determine the payment period of performance payments according to the duration of the risks, and in principle such period shall be at least 3 years.
Agenda
1. Overview of the CIRC remuneration guidelines by Lynn Yang, Norton Rose (Insurance Working Group Vice-Chair)
2. Roundtable on engagement strategy with CIRC relating to the guidelines
3. Any other business