CHINA REGULATOR INTRODUCES CAPITAL ADEQUACY RULES

The China Insurance Regulatory Commission (CIRC) has introduced capital adequacy requirements for insurers, which will take effect from September 1. The new CIRC system will classify insurers according to their level of solvency. Those with less than a 100% solvency ratio will be considered insolvent. “Type 1” solvent insurers will be those with a solvency ratio of 100% to 150%, while  “Type 2” insurers will be those with a solvency level of 150% or above. The CIRC said that insurers judged to be insolvent would be required to increase their capital, restrict payments to management and limit the distribution of dividends to shareholders. PICC P/C, the country’s largest non-life insurer, had a solvency ratio of 189% at the end of last year. Japanese insurers often have solvency ratios approaching 1,000%. Core Pacific-Yamaichi International analyst Olive Xia told South China Morning Post that “to some extent, the new guidelines could restrict the excessive volume growth that exists among small insurers”.