Marine Insurance & Legal Services Liberalization in the Shanghai Free Trade Zone
SHANGHAI – The China Insurance Regulatory Commission has announced that it is using the Shanghai Free Trade Zone as a testing ground for developing China’s national marine insurance industry. The regulator stated that insurance companies can now apply for approval for new marine insurance products from the Shanghai Institute of Marine Insurance (SIMI), marking the first time an industry association has been given the right to issue such approvals.
The SIMI was established under the Shanghai Insurance Regulatory Commission at the end of last year, and currently hosts 31 member businesses, including insurance and shipping companies.
Through its liberalized regulatory permissions, the Shanghai Free Trade Zone now allows for SIMI to approve marine insurance and reinsurance companies to set up branches in the Zone without prior approval, and without placing senior executives in the branch, as previously required. This means that businesses can now provide a broader range of insurance services, bringing more flexibility to the existing marine insurance industry in China and raising the competitiveness of Shanghai’s marine insurance industry overall.
Last year, outstanding premiums on marine insurance reached RMB3.3 Trillion (US$530 billion). Shanghai accounted for 46 percent of the total Chinese market for marine insurance in 2013.
Chris Devonshire-Ellis of Dezan Shira & Associates comments, “These measures, like many of the liberalization reforms in the Shanghai Free Trade Zone, are designed to be experimental for moving forward with reforms in various financial and other services industries, and thereby enable Shanghai to compete on a stronger international footing than has previously been the case. This latest initiative cuts down on state-level bureaucracy in the marine insurance market in China and moves the industry to a market-based, rather than regulatory-based, model better able to adjust to contemporary demands for insurance products.”
In other recent developments concerning the Shanghai Free Trade Zone, a proposal to liberalize the legal services sector in the Zone has received the green light from China’s Ministry of Justice. The Shanghai Bureau of Justice has been tasked with drafting the regulations and measures governing the course of liberalization. When enacted, the new legal services regulations will permit stronger collaboration between Chinese and foreign firms.
Foreign law practices with a Representative Office in the Shanghai FTZ will be permitted to enter into an agreement with Chinese firms to second lawyers to each other’s offices. Chinese lawyers working in the representative office of a foreign firm will be able to provide Chinese domestic legal advice, while foreign counsel working in a Chinese firm can provide legal advice on foreign law.
Additionally, foreign and Chinese firms will be permitted to enter into associations on a contractual basis. The two firms will remain financially and legally independent but be able to jointly provide legal services to clients. Note: only the Chinese party in such an arrangement will be able to provide PRC legal advice.
Chris Devonshire-Ellis comments, “This essentially allows for Sino-foreign joint venture law firms to fully practice international law in Shanghai. While the Chinese party will remain under the auspices of the Chinese Ministry of Justice, it is crucial that foreign firms will now be able to provide Chinese legal advice to their clients via seconded Chinese lawyers—this is a major breakthrough in the legal services profession in China. We are now seeing many international law firms positioning themselves to partner with Chinese firms in future Joint Ventures in the Shanghai Free Trade Zone.”
Details of the restrictions applied to foreign law firms in China and a list of those registered to practice in the country can be found here.
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