CBIRC Notice on Insurance Fund Investment in Collective Trust Funds
CBIRC has amended the "Notice of Issues concerning the Insurance Fund Investment in Collective Trust Funds." The notice is intended to strengthen administration of investments in collective trust funds by insurance institutions, regulate investor behavior, and prevent investment risks of insurance funds. This notice shall come into force from the date of issuance.
The notice will expand the cooperation between insurance institutions and trust companies and help create a level playing field for both parties. It clarifies the supervisory objectives of preventing the use of trust as shadow bank channels and avoiding the embedded complex structures to cap non-compliant investments. It also clarifies the scope for the underlying asset investment, which helps insurance institutions to take advantage of the expertise of trust companies in non-standard assets to enable insurance funds to better serve the real economy. The notice also applies the principle of “non-retroactivity” to ensure sufficient liquidity for relevant institutions, along with a stable market transition.
The revised notice contains 19 articles, out of which certain articles have been either retained or modified from the earlier notice and some articles have been added to the new notice. The new notice retains requirements related to the decision making and authorization mechanism of insurance institutions investing in trust funds, qualification of professional responsible persons, scope of underlying assets, legal risks, post-investment management, information reporting, and industry self-discipline. The new notice also amends information on requirements for trust companies' qualifications, credit rating of trust funds, connected transactions, and accountability mechanism, among others. Finally, the new notice added new requirements such as banning the use of trust companies as conduit, enhancing proactive management responsibilities of trust companies, looking through underlying assets, strengthening suitability management of investors, imposing caps on investment proportions, and credit enhancement arrangement and conditions for exemption from credit enhancement.
Related Links
Effective Date: July 01, 2019
Keywords: Asia Pacific, China, Insurance, Insurance Fund Investment, Collective Trust Funds, Regulation and Supervision, CBIRC
Related Articles
PRA Consults on Implementation of Certain Provisions of CRD5
PRA, via the consultation paper CP12/20, proposed changes to its rules, supervisory statements, and statements of policy to implement certain elements of the Capital Requirements Directive (CRD5).
EIOPA Report Identifies Key Financial Stability Risks for Insurers
EIOPA published the financial stability report that provides detailed quantitative and qualitative assessment of the key risks identified for the insurance and occupational pensions sectors in the European Economic Area.
EBA Publishes Risk Dashboard for First Quarter of 2020
EBA published its risk dashboard for the first quarter of 2020 together with the results of the risk assessment questionnaire.
EBA Issues Updates on Stress Test Exercise for Banks in EU
EBA announced that the next stress testing exercise is expected to be launched at the end of January 2021 and its results are to be published at the end of July 2021.
PRA Proposes Guidance Related to Matching Adjustment under Solvency II
PRA published the consultation paper CP11/20 that sets out its expectations and guidance related to auditors’ work on the matching adjustment under Solvency II.
MAS Issues Guidance on Dividend Distributions by Banks
MAS published a statement guidance on dividend distribution by banks.
APRA Updates Guidance on Capital Management for Banks
APRA updated its capital management guidance for banks, particularly easing restrictions around paying dividends as institutions continue to manage the disruption caused by COVID-19 pandemic.
FSB Report Reviews Macro-Prudential Framework and Tools in Germany
FSB published a report that reviews the progress on data collection for macro-prudential analysis and the availability and use of macro-prudential tools in Germany.
EBA Urges Firms to Finalize Preparations for End of Brexit Transition
EBA issued a statement reminding financial institutions that the transition period between EU and UK will expire on December 31, 2020; this will end the possibility for the UK-based financial institutions to offer financial services to EU customers on a cross-border basis via passporting.
SRB on Operational Continuity in Resolution and FMI Contingency Plans
SRB published guidance on operational continuity in resolution and financial market infrastructure (FMI) contingency plans.
