July 20, 2017

CIRC issued Notice 180/2017 on interim measures for the supervision of credit insurance. These measures are intended to further standardize the credit guarantee insurance business behavior, strengthen the credit insurance business supervision, to prevent systemic financial risks, and promote sustained and healthy development of credit insurance business.

The term "credit guarantee insurance" refers to insurance with credit risk as the subject of insurance, which is divided into credit insurance (except export credit insurance) and guarantee insurance. Article 5 specifies that the insurance company that operates the credit insurance business shall have a core solvency rate of not less than 75% in the previous quarter and its comprehensive solvency adequacy ratio shall not be less than 150%. As per Article 6, the balance of the retained and written duties of the insured business insured by the insurance company shall not exceed 10 times of the net assets at the end of the previous quarter. The balance of retained liability for a single performance obligor and its affiliates shall not exceed 5% of the net assets at the end of the previous quarter and shall not exceed USD 500 million. More than the remaining part of the balance of responsibility requirements, should be reinsurance; not reinsured, not underwriting.

 

CIRC also specifies (in Article 28) that an insurance company operating a credit insurance business shall report to the CIRC on the business operation of the previous year before the end of April each year, including but not limited to the construction of internal risk management system and the situation of professional personnel, along with business operation. Business operations reporting covers basic information, including the regional scope of the business, the size of the insurance, the amount of insurance, the amount of compensation, the amount of money that has been recovered, the amount that has not been recovered, and the actual coverage rate level. These measures (Article 33) shall enter into force on the date of issuance and shall be implemented for a period of three years.

 

Related Link: Notice 180/2017 (in Chinese) 

Keywords: Asia Pacific, China, Insurance, Credit Guarantee Insurance, Credit Risk, CIRC

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