China’s insurance regulator to step up focus on asset liability management

Government to penalise insurers with poorly matched assets and liabilities and reward excellent performers

China’s insurance regulator to step up focus on asset liability management

Insurance News

By Gabriel Olano

The China Insurance Regulatory Commission (CIRC) announced on Friday that it will increase supervision of insurers’ asset liability management as part of the government’s campaign to crack down on risky activities in the insurance sector to avoid systemic financial risks.

According to an online statement issued on Friday by the CIRC, the country’s insurance sector is having difficulty matching assets and liabilities because of “major conflicts” between volatile investment incomes and stable liability costs.

In addition, some insurers do not have proper corporate governance but embark on aggressive investment and operational strategies, exposing them to risks and liquidity issues, reports Reuters.

“Asset liability management is a fundamental ability and the core competitiveness for insurance companies, especially for life insurance companies,” said the CIRC’s statement.

The CIRC has also established a committee to oversee insurers’ asset liability management and the regulatory agency is drafting additional rules, which will come into effect by early 2018.

If an insurer continues to exhibit poor asset-liability matching, the CIRC will limit their investment level and restrict sales of short-term products. The solvency level requirement will also be increased. On the other hand, well-performing insurers will receive rewards such as pilot policies for fund investment and new product issues.

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