Chinese financial regulators’ proposal for tighter solvency regulations is credit positive for China’s insurance industry, says Ms Qian Zhu, VP-senior credit officer, Financial Institutions Group at Moody’s Investors Service.
One reason is the proposed three-parameter framework which will allow better differentiation of insurers by their capital quality and risk management.
The three-pillar framework of solvency supervision consists of quantitative capital requirements, qualitative regulatory requirements and market restraint mechanisms.
The draft regulation highlights the use of core solvency ratio and comprehensive risk assessment on top of existing comprehensive solvency ratio to improve the monitoring and evaluation of insurers’ solvency management.
“In our view, this is a more comprehensive and dynamic approach and is aligned with the spirit enshrined in C-ROSS.” said Ms Zhu.