The CBIRC’s changes to the solvency management of China’s insurance sector are a positive step, particularly in the reinforcement of balance sheet strength and the development of enterprise risk management, says AM Best. The changes will go into effect 1 March.
In its new Best’s Commentary, “China Revises Solvency Management Rules to Strengthen Industry Capitalisation”, AM Best notes that the revised rules will also form the foundation for the regulator’s upcoming release of technical adjustments to insurers’ solvency calculation as part of the wider China Risk-Oriented Solvency System Phase II implementation.
With the updated regulations, the CBIRC defines the accountability of insurance companies’ directors and senior executives toward their companies’ capital management practices. The regulations also require companies to form three-year rolling capital plans and perform stress tests, as well as regularly disclose solvency information. These measures will allow for more dynamic and timely monitoring of insurers’ solvency health.
Insurance groups, captive insurers, mutual companies and onshore branches of foreign insurance companies also are subject to the updated capital management regulations.