Reforming China’s crisis management and market exit mechanism for insurers – A comparative legal study between China, the UK and the US

Insurers are specifically regulated financial institutions. From time to time, there are cases where insurers fall below statutory or regulatory requirements and run into trouble. Only with a well-designed crisis management and market exit mechanism for insurers (the CMME mechanism), can crises of insurers be addressed in an effective and efficient way. Unfortunately, the CMME mechanism has not been well formed in China. The current CMME mechanism is based on the bankruptcy system for ordinary companies, but there is a lack of special consideration for insurers. As a consequence, it is unfeasible to apply many of the measures/procedures therein to troubled insurers. In practice, no case involving a bankruptcy procedure of an insurer has ever occurred. This situation should not continue as the norm in the future, and it is necessary to reform the CMME mechanism to make it more compatible with the special features of insurers. There are two possible routes the reform of the CMME mechanism in China can take: one is to enhance the current mechanism by making more modifications or supplements for insurers to the general bankruptcy system, like the CMME mechanism in the UK; and the other is to rebuild the mechanism to makeit independent of the general bankruptcy system, like the CMME mechanism in the US. Recognising that the CMME mechanisms in the UK and the US represent two typical alternative models, this thesis conducts a comparative legal study of the CMME mechanisms in China, the UK and the US, with the aim of finding out how the mechanism in China can be reformed. Based on the comparative study, this thesis (broadly following the US model) proposes a brand-new CMME mechanism for China, which is independent of the general bankruptcy system, and puts forward a set of recommendations on how the overall framework of the mechanism can be designed.