Global Risk Solutions

Many countries work on a 'Cash before Cover' basis, i.e. the insurance coverage cannot incept until the premium for the policy agreed has been paid to insurers. Current countries which utilise this system include India, South Korea, Japan and Puerto Rico.

Various provinces in China are now making similar moves. The China Insurance Regulatory Commission (CIRC) in Guangdong Province (capital Guangzhou) has advised that with effect from 1st August 2010, all policies with a premium below RMB100,000 (approx. GBP 9,700) issued by insurers in Guangdong should not be effected until payment is received (i.e. even if the client is paying more than RMB100,000 on a whole account basis, those policies with premium lower than RMB100,000 would be subject to this requirement - the same would apply to mid-term endorsements). 

This rule will also apply for local policies forming part of a global programme or a fronting programme.

This regulation is already in effect for Motor & Group PA / Medical business in Guangdong and is now being extended to other non-motor lines with a few exceptions. 

It is expected that similar policies will be adopted in other provinces and cities (for example - 1st  September 2010 for Shenzhen), and in 2011, we expect that this law will be in place throughout China - although the minimum premium trigger may differ from province to province, or even city to city.