China on Monday announced new rules to crack down on irregular related-party transactions of the country's insurance companies.

The regulation, released by the China Banking and Insurance Regulatory Commission (CBIRC), clarified the definition of major related-party transactions, which will be subject to stricter scrutiny.

It also set upper limits on the proportion of assets that insurers can invest in related parties such as subsidiaries or in financial products related to the insurer's controlling shareholders.

The new rules came as some insurance companies had misused related-party transactions in recent years by setting up non-financial subsidiaries or applying complex financial instruments to make profits improperly, posing serious risks, the regulator said.

The regulation requires insurance companies to strengthen internal control and improve mechanisms to punish those involved in irregular related-party transactions.

Authorities have tightened regulations in recent years to fend off financial risks in the world's second-biggest insurance market.

In the first eight months of 2019, the banking and insurance regulator has fined insurance businesses more than 76.8 million yuan (about 10.8 million U.S. dollars) over multiple violations including data fabrication and false advertising.