China Insurance Regulatory Commission, Administration of Insurance Company Solvency Levels and Regulatory Indexes Provisions

Promulgated: March 24 2003
Effective: as of date of promulgation
Interpreting authority: China Insurance Regulatory Commission (CIRC)
Applicability: "Insurance companies" refers to wholly Chinese-owned insurance companies, wholly foreign-owned insurance companies, Sino-foreign equity joint insurance companies as well as branches of foreign insurance companies (Article 2). Provisions governing administration of solvency levels and regulatory indexes of insurance holding companies that do not directly engage in insurance business shall be formulated seperately (Article 20).

Main contents: Part Two of the Provisions details on the calculation of the minimum solvency levels of property insurance companies, life insurance companies and reinsurance companies. Insurance companies must ensure that the actual solvency level is not lower than the required minimum solvency level at all times (Article 3). The actual solvency level of insurance companies should be the difference between recognized assets and recognized liabilities (Article 8). Parts Three and Four prescribe regulatory indexes and the formulae thereof for property insurance companies and life insurance companies. If an insurance company has four or more of its regulatory indexes exceeding the normal range, CIRC may require the insurance company to submit a report explaining the reasons and putting forward methods for improvement (Article 18). Article 13 states that insurance companies shall submit an annual report on solvency levels and regulatory indexes for the previous financial year to CIRC. The solvency attainment rate is equal to the actual solvency level divided by the minimum solvency level. When the solvency attainment rate is less than 100%, CIRC may take the following measures: when the rate is above 70%, CIRC shall request a rectification plan from the company; when the solvency rate is between 30% and 70%, CIRC may, in addition, ask the company to auction its bad assets, order the assignment of its insurance businesses and take other necessary measures; and when the solvency rate is below 30%, CIRC may further place the company in receivership (Article 16). Reinsurance companies shall temporarily apply the regulatory indexes that apply to property insurance companies (Article 19).
Related legislation: PRC Insurance Law (Amended), Feb 28 2009, CLP 2009 No.3 p35
Repealed legislation: Administration of the Minimum Solvency and Regulatory Indexes of Insurance Companies Provisions, 2001