The Ministry of Finance and the National Financial Regulatory Administration have jointly issued the "Implementation Measures for Professional Liability Insurance of Accounting Firms" (Cai Kuai [2026] No. 12), aiming to standardize the development of this insurance type, protect the legitimate rights of clients and other interested parties, and enhance the risk-bearing capacity of accounting firms. Recently, officials from the Ministry of Finance's Accounting Department and the NFRA's Property Insurance Regulation Department addressed questions from reporters regarding the new regulations.
Background of the New Measures
In July 2015, the Ministry of Finance and the former China Banking and Insurance Regulatory Commission issued the interim version of these measures, which played a positive role in regulating insurance procurement and enhancing risk protection for accounting firms. In recent years, with the improvement of China's market economy and professional insurance systems, coupled with rapid capital market growth, investor rights awareness has strengthened significantly. The professional accountability constraints on certified public accountants have intensified, bringing the liability insurance mechanism into greater focus. The State Council's guidelines on standardizing financial audit order and promoting healthy development of the CPA industry called for improving the professional liability insurance system to boost audit risk-bearing capacity. Consequently, a scientific revision of the interim measures was necessary, drawing on recent practice in this field.
Key Revisions
The revision introduces four major changes. First, it clarifies the functional positioning of protecting investors, emphasizing that the insurance should safeguard the legitimate rights of third parties. Second, it strengthens protection for public-interest-related business, raising the basic coverage requirements for firms engaged in securities services or auditing public-interest entities. The basic coverage amount has been increased from RMB 50 million to RMB 100 million. For firms with over 100 partners, a higher standard of RMB 1 million per partner applies. Third, it establishes a more scientific premium rate mechanism, incorporating factors such as the number of CPAs, practice years, administrative penalties, and litigation records into the rate adjustment system, promoting a "reward good, punish bad" approach while helping insurers set rates more accurately. Fourth, it refines supervision, requiring insurance companies to possess appropriate professional qualifications, underwriting capacity, and risk management personnel, with a comprehensive solvency adequacy ratio of no less than 180% in the past three years. The measures also strengthen information sharing and regulatory coordination between fiscal authorities, insurance regulators, and industry associations.
Cumulative Compensation Limits
For accounting firms engaged in securities services or auditing public-interest entities, the cumulative compensation limit for the main insurance policy has been adjusted to "RMB 1 million multiplied by the number of partners, or RMB 100 million, whichever is higher." This calculation method balances the current underwriting capacity of most firms while appropriately raising basic coverage requirements to guide firms in enhancing risk awareness and practice quality. For firms engaged in other business, the existing requirement of "RMB 500,000 multiplied by the number of partners, or the prior year's audit business revenue, whichever is higher" remains unchanged, as this approach effectively balances the needs of small and medium-sized firms. The provision allowing offsetting insurance coverage amounts with retained professional risk funds will also reduce insurance costs for smaller firms.
Contract Principles and Model Clauses
The measures stipulate that accounting firms and insurance companies must enter into contracts on an equal and voluntary basis, following the principle of fairness. The National Financial Regulatory Administration will guide the China Insurance Association to develop model clauses for professional liability insurance, based on input from the Ministry of Finance and other relevant parties. These model clauses will include interpretations of "negligence" and "error" in the professional activities of accounting firms and their practitioners. Insurance companies with similar existing products may directly replace their current clauses with the model clauses after completing the filing procedures.
Relationship with Professional Risk Funds
When the cumulative compensation limit of an accounting firm's professional liability insurance reaches the required amount, the firm may cease setting aside a professional risk fund, following a resolution passed through its internal governance procedures. The retained amount of the professional risk fund from the previous year can be offset against the required insurance coverage. The measures respect the autonomy of business entities, avoiding a one-size-fits-all mandatory requirement, while encouraging firms to enhance risk-bearing capacity through insurance procurement and other means.
Insurance Procurement Methods
In addition to independent procurement, where firms directly negotiate coverage with qualified insurers, the measures introduce co-insurance arrangements. Under this model, two or more insurance companies with underwriting capacity form a co-insurance pool to jointly share liability, premiums, and claims risks, effectively spreading large underwriting risks and claims pressure. Where market competition is not hindered, local authorities may explore centralized insurance procurement models.
Expert Committee on Professional Liability Insurance
Drawing on successful local pilot programs, the measures provide that fiscal authorities and insurance regulators may guide relevant CPA associations and insurance associations to establish an expert committee on professional liability insurance. This committee will provide expert opinions or recommendations on disputes arising from insurance contract clauses or compensation matters, for reference by judicial authorities or relevant parties. Committee members may include representatives from accounting firms, insurance companies, and legal experts to fully reflect diverse viewpoints and facilitate dispute resolution.
Addressing Market Concerns
The core purpose of the professional liability insurance system is to establish a market-based risk-sharing mechanism to improve risk mitigation channels and industry governance for the CPA profession. Both the CPA and insurance industries are highly specialized, and information asymmetry can lead to cognitive differences regarding risk and liability. For the CPA industry, the measures clearly define the boundaries of insurance coverage, holding firms accountable for their practice responsibilities. Insurance only covers civil compensation liabilities arising from negligence or errors during professional activities; intentional fraud or collusion is explicitly excluded from coverage. Firms must not view insurance as a "safety net" that justifies relaxing quality controls or reducing professional diligence. They are required to continuously improve internal quality management systems and adhere to professional standards. For the insurance industry, efforts will focus on optimizing product supply and service quality. This includes developing standardized insurance products with model clauses, stabilizing underwriting capacity through compliant co-insurance cooperation, and improving claims handling standardization. Insurance institutions will be guided to participate in the expert committee and improve claims dispute resolution mechanisms to prevent disagreements at the source and foster a healthy market environment where insurers are willing to insure, dare to insure, and are able to insure.
Implementation and Transition
The measures will take effect on January 1, 2027. During the transition period, the Ministry of Finance and the National Financial Regulatory Administration will strengthen policy interpretation through various channels to ensure smooth implementation. The China Insurance Association will be guided to develop and issue model clauses based on broad consultation. A communication mechanism among fiscal authorities, insurance regulators, and relevant industry associations will be established to promote information sharing and regulatory coordination, jointly supporting the healthy and standardized development of professional liability insurance for accounting firms.