National Financial Regulatory Administration, Measures for the Regulatory Rating of Insurance Companies

“Summary”

Issued: January 7, 2025
Effective: March 1, 2025

Applicability:  These Measures shall apply to Insurance Companies that have been in business for at least one full fiscal year and, in accordance herewith, the Regulator may conduct trial ratings of Insurance Companies that have been newly established in the year in question.

For the purposes of these Measures, the term “Insurance Company” means an insurance group (holding) company, property insurance company, life insurance company, the establishment with legal personality of a reinsurance company or a branch of a foreign insurance company lawfully established in China. For the purposes of these Measures, the term “Regulator” means the National Financial Regulatory Administration (the “NFRA”) and its agencies (Article 2).

Where the a provision on regulatory rating of the Measures for the Regulatory Rating of Personal Insurance Companies is inconsistent with these Measures, these Measures shall prevail (Article 27).

Main contents: The factors involved in regulatory ratings of Insurance Companies include corporate governance, solvency, liability quality, asset quality (including asset-liability matching), information technology, risk management, business position, consumer rights protection, etc.

An insurance group (holding) company may appropriately adjust the ratings of its liability quality, asset quality (including asset-liability matching) and consumer rights protection rating factors; a reinsurance company may omit the consumer rights protection rating factor.

Each rating factor is composed of quantitative and qualitative indicators and the sum of the weightings of the rating factors is 100%. The weightings of corporate governance and solvency may not be less than 15%, the weightings of liability quality, asset quality (including asset-liability matching), information technology and risk management may not be less than 10% and the weightings of business position and consumer rights protection may not be less than 5%.

The NFRA may prescribe differentiated rating factors depending on the business and risk features of different types of Insurance Companies, provided that any weighting is set at no higher than 15%.

A rating of 1 indicates that the overall risks of the Insurance Company are low, its capacity to withstand risks strong and the issues and risks discovered are minor and can be resolved in the course of routine operation and management.

A rating of 2 indicates that the overall risks of the Insurance Company are controllable and its capacity to withstand risks good, but there are certain weak links and latent risks that can be cured in the course of normal operation, and which require the attention of the Regulator.

A rating of 3 indicates that the Insurance Company faces obvious latent risks, its capacity to withstand risks is average and it is barely able to withstand significant changes in its operating environment, and if the existing risks and issues are not promptly addressed, they could further deteriorate, requiring the ongoing attention of the Regulator.

A rating of 4 indicates that the Insurance Company faces a number of issues and relatively serious risks, its capacity to withstand risk is weak and it needs to take immediate corrective measures to prevent further heightening of its risks.

A rating of 5 indicates that the Insurance Company is a high-risk company that could jeopardize financial stability or affect the lawful rights and interests of insurance consumers, requiring that measures be taken immediately to deal with the risks so as to mitigate the same (Article 21).

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