CHINA TO ENFORCE INSURER EXECUTIVE AUDITS FROM JANUARY 1, 2011

China is to standardize audits of the management staff of insurance companies from January 1, 2011, to improve risk prevention, according to the industry watchdog China Insurance Regulatory Commission last week.

The CIRC said that it has published new regulations on the matter.

These say that the audit will cover operational performance, compliance of commercial conduct, and effectiveness of internal controls during the tenure of board members and other senior managers.

An audit for the serving insurance company directors and executives is to be conducted every three years. And audits of personnel who intend to leave the business is to be conducted before they go, whether their departure is due to expiration of contract, post adjustment, resignation, dismissal, or retirement. In cases of possible major fraud, specially tailored audits will be imposed.

As for the focus of the audits, the first tier includes the chairman of the board and other executive directors of an insurance firm; the second tier is senior management; the third is the general managers, vice general mangers and their assistants in provincial-level subsidiaries; the fourth is other general mangers in subsidiaries and people with the same duties.

The CIRC will support any insurance companies that choose to enlarge the audit to other management staff other than those mentioned above.

"Despite the fact that most Chinese insurers have set up necessary audit systems for their management, the majority are still not standardized", said an official with the CIRC, adding that the new regulations could unify industry-wide audits and lead to better supervision.