China Insurance Regulatory Commission, Implementing Guidelines for Comprehensive Risk Management of Personal Insurance Companies

Issued: October 24 2010

Effective: as of date of issuance

Interpreting authority: China Insurance Regulatory Commission

Applicability: The term “companies” in the Guidelines refer to life insurance companies and health insurance companies established in the PRC in accordance with the law (Article 2). The term “risks” refers to the uncertain factors that may have a negative impact on the realisation of business goals by companies (Article 3). The term “comprehensive risk management” means the ongoing process under which all members of staff of an insurance company from the board of directors, management to the other staff members, in the course of the formulation of strategies and day-to-day operations, identify the potential risks, estimate the extent of the risk impact, and effectively manage risks at different sections within its risk appetite (Article 4).

Main contents: The Guidelines have 13 parts covering risk management environment, risk management bodies, risk classification, risk appetite framework, risk identification and evaluation, risk measurement, risk response to and control, asset-liability management, risk warning, risk regulation, and risk reporting and communication.

All companies shall set up a risk management committee and risk management information system by October 1 2013. Starting from 2014, the risks borne by a company as quoted in its annual comprehensive risk management report shall be measured using the economic capital approach.

The main risks that insurance companies face in the course of business operations include market risk, credit risk, insurance risk, operational risk, strategic risk, reputation risk and liquidity risk (Article 27).

Related legislation: Guidelines for the Risk Management of Insurance Companies, 2007; PRC Insurance Law, Feb 28 2009, CLP 2009 No.3 p.35; and Provisions for the Administration of Insurance Companies, Sept 25 2009, CLP 2009 No.9 p.39