The final draft of the set of rules for Phase Two of China. Risk Oriented Solvency System II (C-ROSS II) has been basically decided upon, and the CBIRC is expected to release the rules before the Spring Festival which starts on 12 February, according to industry sources.
The plan for Phase Two, released in September 2017, provides for three main tasks and 26 measures, of which 15 are to improve regulatory rules, six tasks to improve implementation mechanisms, and five to strengthen regulatory cooperation. These will be rolled out step by step with implementation to be completed over three years.
C-ROSS II was officially launched in 2016. Under it, the larger the insurance company, the higher the capital requirements. The special feature of this second generation solvency system is that it is risk oriented, which means that the higher the risk faced by the insurance company, the higher is the capital required of it.
For insurance groups and insurer-controlled financial holding companies, C-ROSS II lays out the capital regulatory framework, proposed capital regulatory standards, and clarifies modes of calculation for minimum capital and actual capital.
Under Phase Two of C-ROSS II, the supervision of the capital of insurance groups and insurer-controlled financial holding companies is mainly reflected in three aspects:
for overseas group member companies, the minimum capital used to be calculated in accordance with regulatory standards of the host countries, but now it is required to be calculated in accordance with Chinese regulatory standards;
capital requirements are set out for risk contagion between groups and for concentration risks of a group;
an insurance group must undertake capital planning and capital management.