China's insurance regulator has once again sounded an alert on risks facing the industry, exhorting insurers to guard against liquidity risks with regular cashflow tests.
In a circular issued last Sunday, CIRC said that insurers must follow and analyse changes in the macro-economy, as well as the stock and bond markets.
"A prudent investment scheme must be established to strengthen asset and liability management and to avoid making return on investment as the only investment goal and performance indicator," the circular posted on the CIRC website added.
Insurers must also improve capital management and prevent capital from being used for other purposes. Internal risk control systems must be improved, the CIRC stressed.
The CIRC also said that it would intensify supervision of insurance companies to make sure they comply with tighter risk controls. It warned that it would investigate executives who flout rules aimed at clamping down on risk-taking.
Sunday's circular was issued exactly two weeks after the central authorities announced that they were investigating former CIRC Chairman Xiang Junbo for serious disciplinary violations. Xiang was removed from the post on 17 April.
Last Thursday, CIRC issued a circular urging insurance regulatory officials to tighten up supervision and rectify disorder in the insurance market. The regulator has been warning about risks for insurers for more than a year, but the subject has turned more serious following aggressive stock buying by insurers that had frustrated the securities regulators, leading CIRC to take tougher action which has been playing out since the end of last year.