Article 87. Where an insurance company engaging in life insurance is cancelled or declared bankrupt in accordance with the law, the life insurance contracts and reserve funds it holds must be transferred to other insurance companies engaged in life insurance business. Upon failure to reach a transfer agreement with other insurance companies, the departments in charge of financial supervision and management may designate an insurance company engaged in life insurance to accept such transfer.

Article 88. Where an insurance company is declared bankrupt in accordance with the law, the bankrupt's assets, after first being used to cover bankruptcy expenses, shall be distributed in the following order of priority:

(1) to pay salaries and labor insurance expenses owed to the workers;
(2) to make indemnification or payment of insurance money;
(3) to pay taxes owed by the company; and
(4) to repay the company's debts.

Payments shall be made on a pro rata basis within each of the categories set forth above if the bankrupt's assets are insufficient to meet the repayment requirement in such category.

Article 89. Where an insurance company terminates business activity in accordance with the law, it shall cancel its license to engage in insurance business operations.

Article 90. In the absence of specific stipulations in this Law concerning the establishment, alteration, dissolution and liquidation of insurance companies, the provisions of the Company Law and other relevant laws and administrative regulations shall apply.

Chapter IV Rules of Insurance Operation

Article 91. The business scope of insurance companies:

(1) property insurance includes property loss insurance, liability insurance, credit insurance and other insurance business;
(2) personal insurance includes life insurance, health insurance, accidental injury insurance and other insurance business.

The same Insurer shall not concurrently undertake both property insurance and life insurance operations.

The business scope of insurance companies shall be verified and determined by financial supervision and management department. Insurance companies shall only undertake insurance business operations within the verified business scope.

Insurance companies which have been set up before this Law is put into effect shall be subject to stipulations of the State Council, pursuant to the above Paragraph 2 hereof.

Article 92. Subject to the verification and determination by the financial supervision and management department, insurance companies may conduct the following reinsurance business for all types of insurance set forth in the previous paragraph.

(1) outward reinsurance;
(2) inward reinsurance.

Article 93. Insurance companies engaging in insurance business other than long-term life insurance shall set aside reserve funds for unrealized commitments from that year's retained insurance premiums. The total amount set aside and retained shall be the equivalent to 50% of that year's retained premiums.

Insurance companies covering long-term life insurance shall set aside reserve funds for unrealized commitments according to the total net value of all valid long-term life insurance policies.

Article 94. Insurance companies shall set aside outstanding loss reserve funds according to the amounts of insurance compensation or payment already claimed and the amounts of compensation or payment yet to be claimed for insured events which have already occurred.

Article 95. Aside from the reserve funds retained in accordance with the stipulations of Article 93 and Article 94 hereof, insurance companies shall, in accordance with relevant laws, administrative regulations and the State financial accounting system, set aside public reserve funds and total reserve funds.

Article 96. In order to guarantee the interest of the Insurer, support the steady operation of insurance companies, insurance companies shall, pursuant to the stipulations of the financial supervision and management department, set aside insurance guarantee funds.

Insurance guarantee funds shall be put under centralized management and subject to overall planned use.

Article 97. Insurance companies shall have a minimum capacity to indemnify which shall not be less than the difference between real assets and outstanding debts as stipulated by the financial supervision and management departments. When the minimum capacity to indemnify is less than the amount of difference as stipulated by the financial supervision and management departments, the insurance company shall increase its capital to make up for the shortfall.

Article 98. The retained premiums by an insurance company covering property insurance operations shall not exceed an amount four times the aggregate of its actual capital plus the public reserve funds.

Article 99. An insurance company shall not allow its insurance of any one high-risk unit (i.e. the extent of maximum loss which may be caused by the occurrence of one insured event) to exceed 10% of its total of actual capital and public reserve funds or total reserve funds. The amount in excess shall be reinsured.

Article 100. Calculation methods for high-risk units and arrangement plans with respect to catastrophe risks by insurance companies shall be submitted to the financial supervision and management department for verification and approval.

Article 101. Except for long-term life insurance, an insurance company shall, in accordance with the State relevant regulations, reinsure 20% of each insurance transaction it underwrites.

Article 102. When requiring outward reinsurance, an insurance company shall give priority to domestic insurance companies.

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