Regulator to scrutinize insurers’ bond transactions

Insurance watchdog makes another move to minimize risks and unsafe investments in the industry

Regulator to scrutinize insurers’ bond transactions

Insurance News

By Gabriel Olano

China’s insurance regulator will be closely inspecting the bond transactions of its supervised insurers, imposing a more stringent assessment regime that aims to reduce risk and discourage use of policy premiums in speculation.
The South China Morning Post reports that the China Insurance Regulatory Commission (CIRC) has required insurers to report their bond transactions prior to March 28, as the regulator aims to “have a full assessment of risks involving insurance companies’ bonds transactions,” according to a regulatory notice.
The move does not signify that trading in bonds is problematic, but it means that the regulator is becoming stricter in assessing and curtailing risks in an increasingly intertwined financial environment, where risks may affect multiple sectors.

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“The regulator is showing a tendency for tighter scrutiny as they are increasingly alert to risks,” Guo Zhenhua, head of the insurance department at Shanghai University of International Business & Economics, told SCMP.
According to CIRC data, as of the end of February 2017, Chinese insurers had invested RMB4.5 trillion (US$653 billion) in bonds, or 32.6% of total capital requirements.

This move is the latest in a series by the CIRC to increase scrutiny in the insurance sector, clamping down on risky insurance activities, even leading to the expulsion of an insurance executive and fining of several insurers.

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