China Unveils Sweeping Insurance Law Revision Draft

China’s National Financial Regulatory Administration (NFRA) on September 4 released a comprehensive revision draft of the Insurance Law for public comment, marking the first major overhaul of the legislation in over a decade. The draft, consisting of eight chapters and 214 articles, introduces significant changes to shareholder oversight, capital requirements, consumer protections, and penalty structures across the insurance industry.

The public comment period runs until October 3, 2026, according to the NFRA announcement. The revision follows years of rapid growth in China’s insurance market, where the current law’s provisions have become increasingly outdated relative to evolving risk landscapes and business models.

A Long-Awaited Overhaul

The current Insurance Law has been in effect since 1995, with amendments in 2002, 2009, 2014, and 2015. However, the 2014 and 2015 amendments were minor, touching only certain provisions. As Xinhua News reported, the NFRA noted that China’s insurance market has developed rapidly in recent years, facing increasingly complex and diverse risk situations, making the current law’s lag increasingly prominent.

The revision comes as part of broader financial regulatory reforms in China, following the establishment of NFRA in 2023 and the release of the Financial Law draft for public comment in March 2026. NFRA Director Ding Xiangqun had called for accelerating the Insurance Law revision at the June 2026 Lujiazui Forum, as Securities Times reported.

Stricter Shareholder and Capital Requirements

One of the most significant changes in the draft is the elevation of minimum registered capital for insurance companies from 200 million yuan to 1 billion yuan. The draft also brings insurance company shareholders and actual controllers under direct regulatory supervision, requiring examination of their capital sources, financial conditions, capital replenishment capabilities, and integrity status.

The revision defines eight categories of prohibited behaviors for major shareholders and actual controllers, including improper interference in company operations, circular capital injection for false capital contribution or capital withdrawal, and nominee shareholding. According to Securities Times analysis, these provisions address long-standing governance failures where problematic shareholders used complex corporate structures to extract funds from insurance companies.

Wu Yiwen, a professor at Wuhan University Law School, explained in 21st Century Business Herald reporting that the draft elevates shareholders’ obligations from passive compliance to proactive action, giving regulators legal authority for full-process supervision and intervention in shareholder behavior. The penetrating supervision requirements for actual controllers solve the enforcement blind spot where nominal shareholders are easy to manage, but behind-the-scenes operators are hard to find.

Enhanced Prudential Regulation and Risk Disposal

The draft strengthens corporate governance, risk management, and internal control requirements while improving solvency regulation and making asset-liability management a legal obligation for insurance institutions. This addresses concerns about asset-liability mismatches that have accumulated interest rate spread risks during periods of declining rates.

The revision also broadens insurance fund investment scope, adding new forms including equity investment, asset management products, asset securitization products, gold and other commodities, and participation in futures and derivatives trading. Cao Shunming, chief compliance officer at China Reinsurance (Group) Corporation, noted that these changes help insurance companies optimize asset allocation and better serve as “patient capital” for the real economy, as reported by The Paper.

On risk disposal, the draft strengthens early correction mechanisms, improves risk identification protocols, and enriches the regulatory toolbox. Yue Wei, an associate professor at Nanjing University Law School, said the revision emphasizes orderly connections between early correction, takeover and restructuring, revocation and bankruptcy liquidation systems, while valuing the role of the insurance protection fund in risk disposal and policyholder rights protection.

Stronger Consumer Protections

The draft elevates the cooling-off period—a mature industry practice allowing policyholders to reconsider their purchases—to a legal requirement. Wu Yiwen noted that insurance contracts are mostly standard-form contracts where policyholders lack bargaining power and can easily make irrational decisions under information asymmetry during sales. The cooling-off period provides institutional compensation for consumers’ disadvantaged position.

For insurance claims other than life insurance and annuity insurance, the statute of limitations would be unified to three years, consistent with the Civil Code. The draft also strengthens personal information protection rules and adds prohibitions on misleading product advertising and inducing agents to violate fiduciary duties.

Sharper Penalties and Agent Rule Changes

The draft substantially increases penalties for violations. Fines for illegal insurance business operations would rise from 1-5 times illegal gains to 1-10 times, while minimum fines without illegal gains would increase from 200,000 yuan to 1 million yuan for insurance companies and from 50,000 yuan to 500,000 yuan for insurance intermediary institutions.

Bai Feipeng, legal director at People’s Insurance Company of China, said the current penalty standards have been in effect for over 20 years and lag significantly behind current economic levels and regulatory needs. The revision applies a principle of proportional punishment, expanding the scope of legal liability while reasonably increasing penalty amounts.

In a notable regulatory shift, the draft adjusts the prohibition on insurance agents and brokers giving benefits outside the insurance contract from all such benefits to only “improper” benefits outside the contract. This change could provide more clarity for industry participants, though the definition of what constitutes improper benefits will need to be clarified in subsequent regulations.

Implications and Outlook

The revision represents a systematic effort to strengthen China’s insurance regulatory framework. As Yue Wei observed, this is not a partial patch but aims at clearer transaction rules, more complete consumer protection, more powerful regulatory tools, and more effective risk disposal, systematically integrating private law adjudication rules with public law regulatory means.

For the insurance industry, the higher capital requirements will raise entry barriers and may trigger consolidation. Existing companies that do not meet the new standards will need transitional arrangements. The expanded investment scope provides new opportunities for asset allocation, while strengthened compliance obligations will require significant operational adjustments.

For consumers, the enhanced protections—including the legal status of the cooling-off period and unified statute of limitations—provide stronger safeguards in an industry where information asymmetry has long been a concern.

The NFRA has stated it will fully absorb feedback from all sectors of society, further refine the legal provisions, and work with legislative bodies to accelerate the revision’s enactment. As the public comment period unfolds, stakeholders across the insurance value chain will be watching closely to see how the draft evolves before final passage.