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AIA CEO: China’s insurance sector sounder in risk management
Online Edition
Chinese insurance sector’s shift to a risk-based solvency system and deepening reforms of the bond market will help lifting Shanghai’s status as an international insurance center, AIA Group CEO Mark Tucker told Shanghai Daily today.
“The newly implemented Chinese risk-oriented solvency system achieves a focus on risks, the quality of being international, and the ability to support market orders,” said Tucker. “It has been the most significant and necessary of the reforms put in place.”
The new solvency system, known as the C-ROSS, officially started this year that assess insurers’ solvency based on risks rather than the size of business as in the previous system.
The new system sets minimum capital requirement based on insurance risks, market risks and credit risks complemented with measures to enhance insurers’ internal management of capital and liabilities.
By the end of March, two of China’s 73 life insurance companies reported negative solvency rates, and three on the edge of regulatory requirement of 100 percent.
Tucker said the new system is risk oriented, market-based and internationally comparable, and it will help eliminating previous discrimination against foreign insurers as in the old system.
“I think this system risk-based, so whether you’re a domestic or international company, you’ll have the same opportunities and the same challenges,” said Tucker. “It’s a system where you are incentivized, effectively as a participant of the market, to do the right things. And I think this is definitely a significant and important improvement.”
Besides, Tucker singled out bond market reforms as a means to help Shanghai establish a first-class international financial center.
“The depth of the bond market is important – the bond market needs to be deep and transparent in its operations,” said Tucker. “I think the opening up of the bond market to find investors, the Hong Kong-Shanghai Connect, the opening up of the free-trade zone, all of these are very positive steps. These are indications of the direction and significance that Shanghai will continue to focus on the financial side.”
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