On 20 January 2011, the China Insurance Regulatory Commission (CIRC) issued a statement banning the country’s insurers, their asset management firms and other affiliates from providing guarantees for other companies’ debt. This ban does not cover lawsuit-related debt guarantees, export credit guarantees and marine insurance guarantees.

Despite this new regulation, insurance groups are still permitted to provide guarantees in respect of their own subsidiaries’ debts. Nevertheless, they must disclose any existing guarantees in financial reports and write off such exposure when assessing repayment ability.  Any non-compliant existing guarantees must be reported to the CIRC by the end of March 2011 and be withdrawn by the end of June 2011.

The ban highlights a wish by the Chinese Government to reduce potential hidden risks in its financial system.