Insurers given approval to launch staff share ownership plans

Daily China

Insurance companies may introduce employee stock ownership plans to improve the industry's corporate governance and profit-sharing mechanism, the industry regulator said on Thursday.

The China Insurance Regulatory Commission said that to be eligible, insurance companies must have been in operation for three years and be profitable for one year before launching such a plan.

Insurance companies are also required to have sound corporate governance and no record of being fined for major irregularities in the past two years, according to a notice issued by the CIRC.

The regulator capped the maximum of employee stock ownership at 10 percent of a company's registered capital. An individual employee can hold shares worth no more than 1 percent of the company's registered capital.

However, employees of insurance asset management companies and on-line insurance companies could hold up to 25 percent of a company's total registered capital.

There will be a three-year lock-up period for employee shareholdings, and they can sell no more than 25 percent of their total shares annually.

"The purpose (of the cap) on employee shareholding is to ensure a balanced shareholder structure," He Xiaofeng, deputy director of the reform and development department at the CIRC, told a news conference in Beijing.

The regulator suspended the launch of employeestock option plans in 2008 amid a public outcry against excessive salaries and benefits for senior executives of insurance companies.

But the regulator determined that the conditions are now in place to introduce such an arrangement to facilitate long-term development of the insurance industry, He said.

In the latest regulation, the CIRC emphasized the necessity for adequate information disclosure by insurance companies about changes in their shareholding structure.

Shares held by employees that exceed 5 percent of a company's total registered capital will be subject to the regulator's approval, the CIRC said.

Ping An Insurance Group Co Ltd, the country's second-largest insurer by market capitalization, and China United Insurance Holding Co Ltd, have already implemented such plans. And more insurance companies will soon follow suit, analysts said.