Improve the scientificity, effectiveness and comprehensiveness of solvency supervision and return the insurance industry to the origin of security

Improving the Scientific, Effective and Comprehensiveness of

　　A few days ago, the China Banking and Insurance Regulatory Commission issued the "Regulations on Solvency of Insurance Companies (II)" (hereinafter referred to as "Rule II"), which marks the successful completion of the second phase of the "C-ROSS" project.

　　From "One Generation" to "One Generation"

　　In 2008, the former China Insurance Regulatory Commission issued the "Regulations on the Administration of Solvency of Insurance Companies", which means that the first set of regulatory systems for the solvency of insurance companies was officially launched, which is commonly known as "one generation".

"One-generation" requires insurance companies to determine capital requirements in accordance with the scale of retained premiums, indemnity or reserves, but the insurance company's risk management capabilities, asset structure, underwriting quality and other factors are not taken into account.

　　In 2012, the construction of "C-ROSS" was launched, and it was officially implemented in 2016 after system formulation, industry testing and other links.

Zheng Wei, director of the Department of Risk Management and Insurance at Peking University, said that the "C-ROSS" regulatory system includes three pillars, namely quantitative capital requirements, qualitative regulatory requirements and market restraint mechanisms.

These three pillars involve three types of risks, namely capitalizable risks, hard-to-capitalize risks, and hard-to-regulate risks.

At the same time, the relevant regulatory rules involve three ends of the balance sheet of insurance companies, namely the asset end, the liability end and the capital end.

　　It is generally believed in the industry that the "C-ROSS" regulatory system regulates the solvency of insurance companies from three aspects: quantitative, qualitative and market constraints, and has established a regulatory system with Chinese characteristics.

In September 2017, the construction of the second phase of the "C-ROSS" project was launched. Combined with the new requirements of financial work and the new situation of insurance supervision, the China Banking and Insurance Regulatory Commission has comprehensively revised and upgraded the current "C-ROSS" regulatory rules to improve the solvency supervision system. scientific, valid and comprehensive.

　　The relevant person in charge of the China Banking and Insurance Regulatory Commission said that the construction of the second phase of the "C-ROSS" project focuses on guiding the insurance industry to return to the source of security, focusing on the main business, enhancing the ability to serve the real economy, effectively preventing risks in the insurance industry, and accelerating the comprehensive opening of the financial industry to the outside world. As the goal, the "C-ROSS" regulatory rules have been comprehensively optimized and upgraded.

　　Guiding the industry to return to the source of security

　　"Rule II" improves the measurement method of interest rate risk, optimizes the asset range and evaluation curve for hedging interest rate risk, and guides insurance companies to strengthen asset-liability matching management.

In response to the significant increase in the risk of serious illness, a serious illness deterioration factor has been added to guide insurance companies to develop critical illness products in a scientific manner.

In view of the long-term characteristics and actual risks of exclusive endowment insurance products, a 10% discount is given to the minimum capital for longevity risk to reflect the orientation of regulatory support.

Zheng Wei believes that from the perspective of liabilities, on the one hand, the basic risk factors of insurance business such as auto insurance and financing credit guarantee insurance have been adjusted, and the deterioration factor of serious illness has been added to consolidate the minimum capital requirements on the liability side; Insurance, exclusive endowment insurance and other state-supported development directions, appropriately reducing capital requirements, reflecting the orientation of regulatory support on the liability side.

　　In promoting the insurance industry to enhance the quality and efficiency of serving the real economy.

"Rule II" improves the actual capital and minimum capital measurement standards for long-term equity investments, greatly improves the risk factor, and implements 100% full deduction of capital for long-term equity investments (subsidiaries) with control rights, prompting insurance companies to focus on their main business .

In order to implement the major decision and deployment of Carbon Peak and carbon neutrality, a 10% discount will be given to the minimum credit risk capital of green bonds invested by insurance companies. 10% discount.

It is stipulated that insurance companies shall not include the appraisal value-added of investment real estate into actual capital, and set regulatory characteristic factors for agricultural insurance business and investment assets whose insurance funds support national strategies, appropriately reduce their capital requirements, and guide insurance companies to serve the real economy.

　　Zheng Wei said that from the asset side, on the one hand, in view of the multi-layered nesting of insurance funds, it is required to "penetrate fully and penetrate to the end", and measure the minimum capital based on the risk substance of the underlying assets actually invested, consolidating the Minimum capital requirements on the asset side; on the other hand, green bonds that meet the “dual carbon” goal and investment assets that meet the national strategic direction for insurance companies should appropriately reduce capital requirements, reflecting the regulatory support orientation on the asset side.

　　It is worth mentioning that, in terms of preventing and resolving risks in the insurance industry, “Rule II” improves the definition of capital and adds exogenous requirements; the expected future surplus of long-term life insurance policies is included in core capital or supplementary assets according to the remaining term of the policy. capital, and consolidate the quality of capital.

In view of the multi-layered nesting problems in the use of insurance funds, it is required to measure the minimum capital based on the underlying assets of actual investment to accurately reflect its risk essence.

All risk factors are fully calibrated based on the most recent 10 years of data.

　　Wang Xiangnan, deputy director of the Insurance and Economic Development Research Center of the Chinese Academy of Social Sciences, believes that "Rule II" firstly improves the completeness of the rules, effectively improves the governance requirements of insurance companies, and comprehensively implements "penetrating" identification and supervision; secondly, it focuses on the forward-looking rules of the rules. The nature, size and complexity of risks in insurance business activities have been identified, assessed and managed in line with the times; the spillover of rules has been brought into play again, and the ability of the insurance industry to serve the quality and efficiency of the real economy has been enhanced.

　　In addition, "Rule II" comprehensively revised the risk management standards of insurance companies, providing clearer standards.

New capital planning regulatory rules have been added, requiring insurance companies to formulate capital plans scientifically.

"Rule II" further expands the content of public disclosure of solvency information by insurance companies, and increases disclosure requirements for major events, management analysis and discussion, etc., which will help improve information transparency and play a market-binding role.

　　Influence of insurance companies

　　According to the requirements of the China Banking and Insurance Regulatory Commission, the insurance industry will fully implement the "Rule II" since the preparation and submission of the quarterly solvency report for the first quarter of 2022.

For insurance companies that are greatly affected by "Rule II", the China Banking and Insurance Regulatory Commission will determine the transition period policy based on the actual situation, allowing some regulatory rules to be put in place step by step, and fully implemented by 2025 at the latest.

　　The reporter learned in the interview that the industry has long expected the full implementation of "Rule II".

Due to the more detailed and strict "Rule II", some insurance institutions that have not yet transformed in time, especially small and medium-sized insurance companies, may face the problem of declining solvency adequacy ratio or even failing to meet the standard.

Zheng Wei believes that "Rule II" has different effects on different insurance companies.

Specifically, the following three types of companies will be greatly affected and impacted.

First, the phenomenon of "multi-layer nesting" in investment assets is serious, and the low-risk assets on the surface cover up the underlying high-risk assets; second, the financing credit guarantee insurance business accounts for a relatively high proportion of the business, or the critical illness insurance business accounts for a relatively high proportion; A considerable proportion of the actual capital depends on the appraisal and appreciation of investment properties, the expected future surplus of insurance policies, or the enhancement effect of financial reinsurance.

　　In recent years, many insurance companies have begun to increase financing efforts such as capital increase and bond issuance.

For example, Yingda Property & Casualty Insurance, China Post Life Insurance, Anxin Property & Casualty Insurance, etc. have publicly stated that they are planning to increase capital. According to incomplete statistics, the cumulative amount of capital increase exceeds 10 billion yuan.

Wang Xiangnan believes that the solvency adequacy ratio and excess will constrain the total amount of risk business carried out by insurance companies, and also constitute many elements of insurance business qualifications, so the solvency regulatory rules have the role of regulating valves or even steering wheels.

The full implementation of "Rule II" will promote the adjustment of the development direction of insurance institutions and enhance the ability of the insurance industry to comprehensively serve the national economy, society, ecology and other fields.

　　From June to November 2021, the CBIRC conducted a solvency risk management capability regulatory assessment (SARMRA assessment) on 43 insurance companies.

SARMRA assessment is an important part of the second pillar of China's risk-oriented solvency system, and it is also an essential element of the first pillar to calculate the solvency adequacy ratio.

According to the "C-ROSS" regulatory rules, the China Banking and Insurance Regulatory Commission conducts SARMRA assessments on some insurance companies every year, and achieves full coverage in three years.

　　The 2021 SARMRA assessment results show that the risk management awareness of insurance companies has been continuously enhanced, the risk management structure and institutional system have been gradually improved, and risk management capabilities have been effectively improved.

Judging from the average score, the average score of the 43 insurance companies was 74.03 points, an increase of 2.11 points compared with the previous assessment.

Among them, the average scores of 25 property insurance companies and 18 life insurance companies were 74.6 points and 72.85 points respectively, which were 3.46 points and 0.4 points higher than the previous assessment.

Judging from the distribution of scores, there are 5 companies with scores above 80, and 29 companies with scores between 70 and 80, accounting for nearly 80% of the total.

From the perspective of the impact on the solvency adequacy ratio, 5 companies with a score of 80 or above can reduce the minimum capital by 1.85 billion yuan, which will increase the solvency adequacy ratio; 38 companies with a score of less than 80 need to increase the minimum capital by 3.82 billion yuan, which will Reduce the solvency adequacy ratio.

　　Although the risk management work of insurance companies has achieved positive results, some deficiencies have also been found in the regulatory assessment, mainly including: some companies copy the modeled risk management system or regulatory rules, which lack operability; Insufficient coordination of relevant departments in some companies reduces the effectiveness of risk management work; some companies are not capable of using risk management tools; some companies have inadequate credit risk management and imperfect internal rating systems.

　　The relevant person in charge of the China Banking and Insurance Regulatory Commission said that the second phase of the "C-ROSS" project is of great significance for preventing and resolving risks in the insurance industry, maintaining the safe and stable operation of the insurance market, promoting the high-quality development of the insurance industry, and protecting the interests of insurance consumers.

In the next step, the China Banking and Insurance Regulatory Commission will organize and guide insurance companies to make preparations for the implementation of "Rule II", ensure a smooth transition between the old and new rules, and maintain the safe and stable operation of the insurance market.