China’s Insurance Regulator Issues New Requirements for Solvency Levels

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The China Banking and Insurance Regulatory Commission (CBIRC) has issued a new directive on measures to address the solvency levels of insurance companies.

On 25 January CBIRC officially issued its first directive for 2021 – the “Insurance Company Solvency Regulatory Provisions” (保险公司偿付能力管理规定).

The Provisions are scheduled to come into effect on 1 March, and stipulate that insurance companies must simultaneously satisfy three regulatory requirements:

  • A core solvency ratio of no less than 50%;
  • A comprehensive solvency ratio of no less than 100%;
  • A comprehensive risk grade of B or above.

Chinese insurance companies that fail to satisfy any one of the three targets will be deemed to have fallen short of solvency requirements, and be subject to mandatory measures and discretionary measures.

Mandatory measures will be reserved for those insurance companies that fail to satisfy solvency ratio requirements, and will include:

  • Discussions with regulators.
  • Requiring that insurance companies submit plans to prevent the worsening of solvency ratios or make improvements to risk management.
  • Restrictions on the salary levels of directors, supervisors and senior executives.
  • Restrictions on dividends for shareholders.

CBIRC has already adopted measures outlined by the provisions to discipline Chinese insurers. In January 2021 CBIRC issued the first “administrative regulatory measure decision” to Anxin Insurance, after its core and comprehensive solvency ratios fell to -125.7% in October 2020.

Anxin was ordered to increase its capital, suspend vehicle insurance operations, and place caps on the salaries for directors, supervisors and senior executives.

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