Insurers in China lack risk management professionals and tools, which may leave them unprepared for the new risk-oriented solvency system, according to an industry survey conducted by accounting firm PwC.
The survey was done in May and June and asked insurers regarding C-ROSS, the new solvency supervision system that took effect this year. The respondents, which included life insurers, property and casualty insurers, reinsurers, pension insurers and health insurers, represented 80% of the players in China’s insurance market, with combined premiums of US$284.6bn in 2015.
Jimi Zhou, a PwC consulting partner, told the South China Morning Post
: “The Chinese insurance industry needs at least four to five years to build up a comprehensive and effective risk management system… Chinese insurers are still at an early stage of risk management and are short of professionals in numbers and experience.”
Zhou also added that insurers have not allotted adequate resources and investment into upgrading their risk management capabilities, relegating it to mere compliance requirements.
The China Insurance Regulatory Commission (CIRC) wants insurers to improve risk management though solvency aligned risk management requirement and assessment, or SARMRA.
Insurers expect the industry average to rise to 78 this year, from an average of 71 last year. However, PwC said that the official assessment may be five points lower.
If an insurer’s SARMRA score exceeds 80, each point is equivalent to a 0.5 percentage point lower capital requirement. So if an insurer’s minimum capital requirement is US$1bn, a SARMRA of 81 means US$5m less in capital requirement. But if the SARMRA score is 79, then the capital requirement is US$5m more.
The CIRC’s next assessment will be conducted between June to October, and good risk management ratings may result in up to 10% lower capital requirements, while low risk management scores could bring up to 40% higher capital requirement.
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