China’s insurance sector expands at a “very rapid” pace – IMF

Financial institution recognises efforts for far-reaching reforms

China’s insurance sector expands at a “very rapid” pace – IMF

Insurance News

By Paolo Taruc

China’s insurance sector has expanded at a “very rapid” pace, and is expected to continue growing, according to the International Monetary Fund’s (IMF’s) latest stability assessment of the country’s financial system.

According to the IMF, the rapid growth poses a challenge for effective oversight.  “New entrants, products, and distribution channels—as well as price liberalization—have increased competition, while slower economic growth and lower investment returns have increased risks,” it said.

The report said many non-life insurers are expanding into new lines. Some sell short-term products with limited insurance content that are similar to wealth management products and bank deposits and this has caused a “regulatory reaction” from authorities.

The IMF also recognized the government’s efforts in establishing far-reaching reforms, which have resulted in a high level of compliance with the Insurance Core Principles of the China Insurance Regulatory Commission (CIRC).

“The China Risk-Oriented Solvency Standards (C-ROSS) implemented in 2016 draw on international practices and Chinese experience to create both risk-based solvency standards and a framework for in-depth assessment of insurers’ risk management,” it added.

However, the assessment called on the insurance regulator to do more to develop an overall view of the key risks of the large insurers across the range of its supervisory functions. It said the supervisory framework should move to a fully risk-based approach, bringing together all the issues and actions for each insurer.

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