Circular on Issues Relevant to Reinsurance Business Safety
关于再保险业务安全性有关问题的通知
The Circular provides guidelines to reinsurance contracts and retrocession contracts whose term commences on or after January 1 2008 as to risk management mechanism, financial strength ratings, paid-in monetary capital, solvency and trading history requirements for the selection of a reinsurance cedent.
(Issued by the China Insurance Regulatory Commission on November 15 2007.)
Bao Jian Fa [2007] No.112
Insurance companies:
With the rapid development of the insurance market in China, the task of guarding against risks has become increasingly onerous. As the principal means of guarding against risks and spreading risks, the function of reinsurance has increasingly come to the fore. However, the reinsurance market itself poses certain risks, and, in particular, factors such as the solvency, financial position and profitability of a reinsurer have a material impact on the stable operations and healthy development of a cedent. With a view to thoroughly implementing the spirit of the 2007 National Insurance Conference, strengthening the establishment by the insurance industry of mechanisms for guarding against risks, improving the insurance industry's capacity to counter risks and promoting the rapid and healthy development of the insurance market, we hereby notify you concerning relevant issues as follows:
1. A reinsurance cedent shall establish a sound risk management mechanism and strengthen its management of the risks involved in reinsurance business.
(1) A cedent shall improve its risk assessment system and risk control mechanism, review its reinsurance plan each year, establish objective reinsurance business assessment standards, examine its risk position, including its reinsurance risks, periodically assess its risks, and establish a mechanism for the identification, assessment and monitoring of risks.
(2) A cedent shall formulate clear policies and procedures based on its reinsurance strategy, prudently select reinsurers, formulate reinsurance plans in an objective manner, asses the safety of its reinsurance business and periodically review each of its reinsurance contracts.
(3) A cedent's chief actuary shall earnestly perform his duties of formulating or participating in the formulation of reinsurance rules and regulations and reviewing or participating in the review of reinsurance arrangements and plans. If a cedent has not yet established a chief actuary system, its person in charge of actuarial affairs shall provisionally perform the aforementioned duties.
(4) If a cedent is not an independent legal person institution, it shall, with the authorization of its head office, operate compliantly in strict accordance with the law, improve its internal control implementation capabilities and ensure compliant management of its reinsurance business.
2. When selecting a reinsurer, a reinsurance cedent shall observe the following requirements:
(1) when entering into a reinsurance contract, with the exception of nuclear insurance and aerospace insurance, the lead reinsurer of the contracted reinsurance or the reinsurer of the largest share of contracted reinsurance shall be a wholly state-owned or a state-controlled insurance company, or an insurance firm whose most recent financial strength rating, at minimum, satisfies one of the following criteria:
(i) a Standard & Poor's rating of not less than A-;
(ii) an A.M. Best rating of not less than A-;
(iii) a Moody's rating of not less than A3; or
(iv) a Fitch rating of not less than A-;
when entering into a reinsurance contract, with the exception of nuclear insurance and aerospace insurance, the other reinsurers of the contracted reinsurance shall be wholly state-owned or state-controlled insurance companies, or insurance firms whose most recent financial strength rating, at minimum, satisfies one of the following criteria:
(i) a Standard & Poor's rating of not less than BBB;
(ii) an A.M. Best rating of not less than B++;
(iii) a Moody's rating of not less than Baa; or
(iv) a Fitch rating of not less than BBB;
(2) except in the case of nuclear insurance or aerospace insurance, the paid-in monetary capital of a reinsurer may not be less than Rmb200 million or the equivalent in another currency and, if the lead reinsurer of the contracted reinsurance or the reinsurer of the largest share of the contracted reinsurance is a firm not specializing in reinsurance, its paid-in monetary capital may not be less than Rmb1 billion or the equivalent in another currency;
(3) the solvency of a reinsurer shall comply with relevant provisions on solvency of the regulator of the place where the company is registered and the cedent shall timely keep abreast of the reinsurer's solvency status;
(4) a reinsurer may not have committed any major violation of laws or regulations in the two financial years preceding the commencement date of the reinsurance contract.
3. If, during the term of a reinsurance contract, the financial strength rating of a reinsurer falls below the requirements hereof for three years in succession, the cedent shall consider taking appropriate measures to reduce its risks.
4. For the purposes of Article 2 hereof, the term "reinsurer" refers to an independent legal person institution. If a reinsurer is a (sub-)branch, its head office shall satisfy the foregoing relevant requirements of this Circular.
5. This Circular shall apply to reinsurance contracts and retrocession contracts whose term commences on or after January 1 2008.
(中国保险业监督管理委员会于二零零七年十一月十五日发布。)
保监发 [2007] 112号
各保险公司:
随着我国保险市场的快速发展,风险防范任务日益艰巨。作为风险防范和风险分散的主渠道,再保险的功能作用日益突出。然而,再保险市场本身也存在一定风险,特别是再保险接受人的偿付能力、财务状况、盈利能力等因素,对分出公司的稳定经营和健康发展影响重大。为贯彻落实2007年全国保险工作会议精神,加强保险业风险防范机制建设,提高保险业抗风险能力,促进保险市场又快又好发展,现就有关问题通知如下:
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