China: CIRC mulls revising rules for guarantee fund
Source: Asia Insurance Review | Jan 2018
The insurance regulator CIRC is considering amending rules for the country’s insurance security fund, which will allow the fund to provide necessary liquidity support to insurers in case of a crisis.
Industry experts said that the plan highlights CIRC’s intention to boost the role of the fund in preventing industry risks as some insurers may be exposed to liquidity problems as the authorities have substantially tightened regulations to curb systemic financial risks.
The revised rules will require insurers to allocate a certain proportion of capital to the fund based on the evaluation of their risk management capability, meaning that some insurers will likely face higher capital requirements if they have poorer risk management performance, according to a report in China Daily.
The new rules will also expand the usage of the fund, allowing it to offer capital support to insurers if they face a liquidity crisis. The maximum amount of capital insurers can obtain from the fund as liquidity support cannot exceed 15% of the outstanding balance of the fund in the previous year, the report said.
China set up the insurance security fund in 1995 to protect the interests of policyholders in the event of the insolvency of an insurance company.
The fund had reserves of CNY107.8 billion (US$16.3 billion) by the end of July, with property and casualty insurance funds accounting for 63.7% of the total. A