Jeffrey E. Thomas

The Role and Powers of the Chinese Insurance Regulatory Commission in the Administration of Insurance Law in China

The Chinese insurance market has generated intense international interest and market circumstances are favorable for continued growth. To manage this growth, a national Insurance Law was adopted in 1995, and the creation of the Chinese Insurance Regulatory Commission (CIRC) in 1998 to administer the law. This article analyses the role and powers of CIRC in the administration of the national Insurance Law. It describes the law and CIRC’s administrative powers in legal and cultural context. It considers the impact of the China’s accession to the World Trade Organization (WTO) on CIRC’s administrative powers. This article shows that while the Insurance Law appears to provide predictable rules for the insurance market, CIRC’s broad statutory discretion, combined with the absence of meaningful review and a cultural tolerance for highly concentrated administrative power, substantially undermines the predictability of the law. Although China’s accession to the WTO provides a theoretical legal framework with limits on CIRC’s discretion, this framework is unlikely to have much practical effect on CIRC’s discretion in the short run. Consequently, insurers doing business in China must develop a good relationship with CIRC, and should not rely too heavily on apparent legal rights or legal remedies. This article begins with a historical overview of developments in the insurance industry, and puts that history into the context of developments in the legal system. A general description of the Insurance Law and its enforcement mechanisms follows. The article then analyses the extent of CIRC’s administrative discretion, the effectiveness of limitations on that discretion provided by the legal system, and the effect of such discretion on enforcement in the case of Sedgwick Insurance Risk Management Consultants (China) Ltd. The article next considers the effect of China’s accession to the WTO on CIRC’s ability to exercise administrative discretion, and draws some general conclusions.

Exclusion of Terrorist-Related Harms from Insurance Coverage: Do the Costs Justify the Benefits?

The September 11 attack was the largest single insured event in history. In the end, insurance companies are expected to pay approximately

Legal Culture and The Practice: A Postmodern Depiction of the Rule of Law

50 billion to victims of the attack. In response to the perceived potential of future terrorist losses, many insurers have begun to exclude terrorist-related losses from their policies. In light of the size and uncertainty of future losses, this is understandable. In adopting this approach, however, it appears that little thought has been given to the transaction costs associated with the exclusion. One of the significant contributions of Law and Economics to legal literature has been to illuminate the importance of transaction costs in making normative and policy decisions. This Article applies that contribution to the insurance industrys response to the September 11 attack. It contends that the transaction costs associated with the terrorism exclusions will be so great that they will seriously erode, and perhaps outweigh, the benefits to be derived from the exclusion. This Article begins with a brief description of the events leading up to the adoption of the exclusion and an outline of the basic provisions of the exclusion. It then develops a simple quantitative model to illustrate and evaluate the potential transaction costs from the use of the exclusion. The final section of the Article will identify insights and conclusions that can be drawn from the model.