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The bankruptcy of an insurance company refers to a legal act in which an insurance company cannot pay its due debts. With the consent of the insurance regulatory authority, the court declares bankruptcy in accordance with the law, terminates the company's business operations and eliminates its legal personality.

Insurance company bankruptcy

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The bankruptcy of an insurance company refers to a legal act in which an insurance company cannot pay its due debts. With the consent of the insurance regulatory authority, the court declares bankruptcy in accordance with the law, terminates the company's business operations and eliminates its legal personality.

Chinese name

Insurance company bankruptcy

Features

Insurance company cannot pay due debt

Related

With the consent of the insurance regulatory authority

Attributes

Legal act

According to Article 87 of China's Insurance Law, the bankruptcy of an insurance company must be approved by the CIRC before it can be declared by the court. After the insurance company is declared bankrupt, the court shall organize the Insurance Regulatory Commission and other relevant departments and personnel to set up a liquidation group to perform liquidation. It is worth noting that according to Article 88 of the Insurance Law, if an insurance company operating a life insurance business is cancelled or declared bankrupt according to law, the life insurance contract and reserve held by it must be transferred to other operations An insurance company with a life insurance business; if a transfer agreement cannot be reached with other insurance companies, it shall be accepted by an insurance company designated by the insurance supervision and management agency to operate a life insurance business. And in this process, the legitimate rights and interests of the insured and beneficiaries should be safeguarded. Compared with the bankruptcy of other general corporate legal persons, the order of bankruptcy settlement of insurance companies has certain particularities. According to Article 89 of China s Insurance Law, if an insurance company goes bankrupt according to law, the bankruptcy property shall pay its bankruptcy expenses first, and then pay off in the following order: Employee wages owed and labor insurance costs; Compensation or insurance payments; Arrears of taxes; settlement of company debts. If the bankruptcy property is insufficient to settle the claims in the same order, it shall be distributed in proportion. ^[1]

Including: Relaxing Insurance Controls: The insolvency of several US insurance companies, including Integrity Insurance, was caused by a lack of loose control over their general insurance agents. As a result, the general insurance agent is negligent in quality control of the business it represents. ^[1]

It has four characteristics: ^[1]

1. The negative effects of bankruptcy of insurance companies ^[2]

Regarding the commencement of bankruptcy proceedings. Bankruptcy proceedings generally begin when the parties concerned apply. Creditors and debtors of insurance companies, as well as the takeover team of insurance companies, have the right to apply to the court for bankruptcy of insurance companies. In some foreign countries, insurance legislation provides that the court can declare the bankruptcy of an insurance company directly, but China's "Insurance Law" has different provisions on this. In order for an insurance company to apply for bankruptcy in China, it must be approved by the insurance supervision and management department before the people's court can declare the insurance company bankrupt. When applying for bankruptcy, a bankruptcy applicant must submit relevant materials stating that the debtor has already met bankruptcy conditions. Bankruptcy cases are generally heard by the court where the insurance company is located. ^[3]

According to the provisions of the Enterprise Bankruptcy Law (Trial) and Chapter 19 of the Civil Procedure Law, the procedures for bankruptcy and debt repayment are: ^[4]

After the insurance company is declared bankrupt by the people's court, the people's court organizes the insurance supervision and management department and other relevant departments and relevant personnel to form a liquidation group to carry out liquidation. The liquidation procedures are conducted in accordance with the bankruptcy and debt repayment procedures stipulated in the Enterprise Bankruptcy Law (Trial) or the Civil Procedure Law. According to Article 89 of the Insurance Law, after the bankruptcy property is paid in priority, the bankruptcy property is paid off in the following order: (1) employee wages owed and labor insurance costs; (2) compensation or insurance payments; (3) Taxes owed; (4) Settle the company's debts. If the bankruptcy property is insufficient to settle the claims in the same order, it shall be distributed in proportion. ^[4]

1. Bankruptcy liquidation of a wholly state-owned insurance company. The bankruptcy liquidation of a wholly state-owned insurance company shall be carried out in accordance with the relevant provisions of the Enterprise Bankruptcy Law (Trial). After an insurance company declares bankruptcy due to insolvency, the people's court shall set up a liquidation group within 15 days from the date of declaration to take over the bankrupt company. The people's court may organize a company's superior authority, the China Insurance Regulatory Commission, the company's bank and accountants, auditors, lawyers and auditors to form a liquidation group, which is responsible for the custody, cleanup, valuation, processing and distribution of bankruptcy property, Conduct necessary civil activities in accordance with law. The liquidation team is led by the people's court and is responsible for and reporting to the creditors' meeting. After the liquidation team is formed, work can be carried out. After liquidating the company's property and creditor's rights and debts, it can propose a distribution plan for bankruptcy property, which can be reported to the people's court for execution after being approved by the creditors' meeting.

2. Bankruptcy liquidation of a limited liability company. An application for bankruptcy of a company limited by shares may be filed by the company after a shareholders' general meeting resolution or by creditors. The people's court shall declare bankruptcy if it meets the bankruptcy conditions and is approved by the China Insurance Regulatory Commission. After the commencement of bankruptcy proceedings, the people's court shall notify the debtor and known creditors within 10 days and issue an announcement. Creditors shall, within 30 days of receiving the notice, and creditors who have not received the notice shall, within 90 days of the announcement, declare their claims to the people's court. Failure to report within the time limit shall be deemed as abandonment of creditor's rights. After the people's court declares the company bankrupt, it shall form a liquidation group to take over the bankrupt company. After the liquidation group has completed the liquidation of the company's property, claims, and debts, it proposes a bankruptcy liquidation plan to the people's court.

3 An insurance company operating a life insurance business was cancelled in accordance with law or the business was transferred after being declared bankrupt according to law. Life insurance business is an insurance business with human life or body as the subject of insurance. The life insurance company's operations are based on actuarial calculations. Each life insurance policy is subjected to life actuarial calculations to determine the amount of the insured's payment and the amount of insurance that should be paid after the policy expires; moreover, due to life insurance Has a longer insurance term and therefore has a certain saving nature, which means that every life insurance policy has a cash value. The value of these policies is the unearned liability reserve and outstanding claims reserve drawn by the life insurance company every year according to the regulations, that is, the liability reserve of the insurance company is actually the liability of the insurer to the insured. Therefore, in order to maintain the seriousness of the insurance contract and fully protect the interests of the insured, when a life insurance company is revoked in violation of laws, administrative regulations, or fails to pay due debts and is declared bankrupt by the people's court according to law, the company's life insurance Contracts and liability reserves must be transferred to other insurance companies operating life insurance business to continue operations, and the transferred contracts continue to be valid. After the transfer of such contracts and reserves, the company that accepted the transfer played the role of the original company, and its rights and obligations relationship with the original insured was equal: both the rights the original company enjoyed under the contract and the Undertake the obligations that the original company should perform in accordance with the contract. During the transfer process, the original life insurance company and other insurance companies should fully negotiate and reach a transfer agreement on an equal and voluntary basis. If an agreement cannot be reached, the People's Bank of China should designate one or more insurance companies with a life insurance business to accept insurance contracts and reserves according to the prevailing insurance business conditions, and the designated insurance company must accept.