China's Insurance Law Revision Draft Seeks Public Comment, Tightens Shareholder Oversight and Raises Fines

China's Insurance Law is undergoing its first major revision in 11 years. The draft revision, titled the Insurance Law of the People's Republic of China (Draft Revision for Comment), has been released for public comment, with feedback accepted until October 3, 2026. The current Insurance Law, in effect since 1995, was amended in 2002, 2009, 2014, and 2015. This revision marks a comprehensive update after more than a decade.

The National Financial Regulatory Administration stated in its explanatory notes that the rapid development of China's insurance market in recent years, coupled with increasingly complex and diverse risk conditions, has highlighted the lag in the current law. A comprehensive revision is necessary to address prominent issues in industry development and regulation, ensuring the sector's continued stable operation. The revision summarizes recent reform achievements and regulatory practices, focusing on strengthening institutional, behavioral, functional, look-through, and continuous supervision, while closing regulatory gaps, addressing shortcomings, and clarifying regulatory mandates to enhance overall effectiveness.

The draft comprises 8 chapters and 214 articles, with amendments in five key areas: strengthening shareholder look-through supervision, improving prudential regulation, enhancing risk disposal mechanisms, reinforcing consumer protection, and increasing penalties for violations.

The draft brings insurance company shareholders and actual controllers under regulatory oversight, tightening qualification reviews for major shareholders and actual controllers, and strictly controlling market entry. It clarifies shareholder capital contribution obligations, related-party transaction reporting, and information disclosure duties, while prohibiting equity holding through nominees and improper interference in company operations. New regulatory enforcement measures and specific penalties targeting shareholders and actual controllers have been added.

The draft strengthens prudential requirements for corporate governance, risk management, and internal controls, promoting prudent and compliant operations. It enhances capital management and improves the solvency regulation legal framework. It also refines asset-liability management to ensure reasonable matching of maturities, cost-benefit, and cash flows. Investment regulation is updated to broaden insurance fund usage, with new permissible forms including equities, asset management and asset-backed securities products, commodities such as gold, and futures and derivatives. According to data from the National Financial Regulatory Administration, insurance company funds under management totaled RMB 40.8 trillion in the second quarter of 2026.

The draft improves early correction mechanisms, emphasizing early identification, warning, exposure, and handling of risks. It expands the regulatory toolkit, adds risk disposal measures, clarifies the duties of takeover teams, and provides a legal basis for risk handling. The insurance protection fund system is refined to enhance coordination and improve the foresight, timeliness, and effectiveness of disposal efforts. The draft stipulates that the insurance protection fund provides limited assistance, with amounts exceeding the assistance cap to be recovered by policyholders, insured parties, and beneficiaries from the liquidation assets of the revoked or bankrupt insurer. The fund management institution obtains claims against the insurer in the same priority order as policyholders, insured parties, and beneficiaries, up to the assistance amount. The 2022 Measures for the Administration of the Insurance Protection Fund provide that the fund may be used when an insurer is legally revoked or declared bankrupt and its liquidation assets are insufficient to cover policy benefits, with assistance amounts subject to varying caps depending on policy type and amount.

The draft clarifies consumer protection responsibilities, reinforcing insurers' primary obligations and strengthening regulatory oversight of consumer protection work. It improves the dispute mediation mechanism for insurance consumers and provides a higher-level legal basis for such efforts. Consumer rights protections are expanded, including new personal information protection rules and prohibitions on misleading sales and other practices that infringe consumer rights. The insurance contract system is improved, aligning with the Civil Code, and mature practices such as the cooling-off period are elevated to legal status, enhancing protection for insurance consumers.

The draft implements strict and strong regulation, adhering to principles of proportionate punishment, combining fines and confiscation, and balancing severity with leniency. It broadens the scope of legal liability, moderately raises fine levels, and increases the cost of violations. In the legal liability chapter (Chapter 7), the maximum fine is generally raised to ten times the illegal gains, compared with five times under the current law. The draft also strengthens accountability for directors, supervisors, senior managers, and other directly responsible personnel. For serious violations, in addition to administrative penalties, it further improves mechanisms such as market bans and industry restrictions.