China to push standardisation of credit risks

Draft regulation sets solvency ratio thresholds and other guidelines to strengthen credit risk insurance sector

China to push standardisation of credit risks

Insurance News

By Gabriel Olano

The insurance regulator of China has released draft rules to bring about the standardisation of insurance firms and protect the industry against credit risks.

According to the rules proposed by the China Insurance Regulatory Commission (CIRC), insurers that offer credit risk insurance must have a core solvency adequacy ratio of not lower than 75% in the most recent quarter, while their comprehensive solvency adequacy ratio must be above 150%.

Companies that are unable to meet the solvency requirements must stop issuing new credit risk insurance policies, the regulator said. Insurers will also be barred from offering credit risk insurance to companies with AA or lower ratings.

The draft regulation stated an upper limit of outstanding liabilities, in order to make sure that insurance companies have the ability to pay their obligations. It also requires companies to establish a mature system of risk controls and thoroughly investigate the client’s ability and willingness to pay.

Relevant parties have been given until June 25 to provide their opinions and comments to the CIRC.

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