CBIRC amended the Insurance Company Solvency Regulatory Rules titled Q&A No. 1: the Counter-party Default Risk Factors for Qualified Hong Kong Reinsurance Companies during the Transition Period of the Equivalence Assessment Framework Agreement on Solvency Regulatory Regime (also known as Q&A No. 1). The amendment clarifies that, for the qualified reinsurance institutions in Hong Kong, the term of reinsurance credit risk factor applicable when ceded from Mainland China’s direct insurance companies is being extended by another year to June 30, 2020.
In May 2017, the former CIRC and the then Office of Commissioner of Insurance (OCI) in Hong Kong (now Insurance Authority) signed the Framework Agreement. Both parties agreed that the transition period of equivalence recognition started on signing of the agreement. To implement the Framework Agreement, CBIRC issued the Q&A No.1 in June 2018, granting a one-year provisional treatment on credit risk exposure to Hong Kong reinsurance counterparties in solvency calculation in the transition period.
The signing of the Framework Agreement and the revised Q&A No.1 are important measures from CBIRC to help maintain Hong Kong’s prosperity and stability and to further opening up of the financial sector. These measures will promote the common development of insurance markets in Mainland China and in Hong Kong. Moving forward, CBIRC and Hong Kong Insurance Authority will continue to study the regulatory policies applicable to both parties under the equivalence framework of solvency regulation.
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Keywords: Asia Pacific, China, Hong Kong, Insurance, Reinsurance, Framework Agreement, Transition Period, Insurance Authority, Solvency Regime, Equivalence Assessments, CBIRC
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