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    CBIRC Notice on Use of Credit Risk Mitigation Tools in Insurance

    May 15, 2019

    CBIRC published a notice on "participation of insurance funds in credit risk mitigation tools and credit protection tools." Credit risk mitigation tools and credit protection instruments referred to in this notice refer to credit derivatives used to manage credit risk. The notice aims to allow and regulate the participation of insurance funds in the business of credit derivatives. It is intended to further enrich the use of insurance funds and provide hedging measures for credit risk management.

    The notice defines the purpose of participation. It is stipulated that the participation of insurance funds in the credit derivative products business is limited to hedging risks and may not be used as a credit risk-bearer. The notice also provides clarification regarding the qualifications of the participants. The insurance institutions need to have the ability to use derivatives and credit risk management capabilities to participate in the credit derivatives business. The notice mentions that insurance institutions should formulate corresponding management systems and operational procedures, monitor and regularly assess risks, and submit monthly, quarterly, and annual reports to CBIRC.

     

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    Keywords: Asia Pacific, China, Insurance, Credit Derivatives, Credit Risk Mitigation Tools, Credit Risk, Hedging, CBIRC

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