Are we ready for the new solvency regime in China?
We recently conducted a survey on how well the non-life insurers have prepared for the China Risk Oriented Solvency System (“C-ROSS”). And we released the findings during our C-ROSS seminar series in Beijing, Shanghai and Shenzhen in March. Director of the Accounting Department of the China Insurance Regulatory Commission (CIRC) spoke at the seminar in Beijing to explain the detailed requirement of C-ROSS.
Benny Yuan, Actuary of Swiss Re, presented at the seminars key findings of the survey. He highlighted that 40% insurance companies with risk management systems saw an increase in solvency ratio after the C-ROSS rollout, which is in contrast to 15% in the case of insurers who have no or little organizational set up in risk management. To a certain extent, this reflects the positive effect of risk management on solvency ratio.
Findings of the survey reveal that foreign companies are better prepared than Chinese companies in terms of risk management, partly because the global requirement on risk management from their parent companies. The majority of Chinese companies has set up risk management committees and have adopted re-insurance as a risk management tool. Large companies clearly outperform their smaller counterparts in terms of organizational structure.
Qin Lu, Swiss Re President for China, pointed out that insurers should accelerate preparation from working level to management level. That means the management should pay due attention and improve corporate governance at the level of risk management, so that they can enjoy better solvency results under the new regulation.
The survey results also show that insurers with better risk management tend to have more positive expectation on business growth for virtually all business lines.
We are now working with insurers to share experience of risk and capital management and assisting them working out effective solutions to meet C-ROSS requirements.
Published 8 April 2015