The Chinese insurance industry regulator, the China Insurance Regulatory Commission (CIRC), has released its final requirements for collateral in cross-border reinsurance business, which relaxes some of the previous requirements.
After a consultation period the Final Version of the ‘Notice Relating to Collateral Provided by Offshore Reinsurers’ has been released by the CIRC, and has been published on the organisations website. The Final Version explains the requirements collateral offered by offshore reinsurance companies must meet for a lower risk factor to be applied by the ceding firm to the reinsurer, under China’s C-ROSS solvency regime.
The two key points in the Final Version of the Notice that differ from the Draft Version of the guidelines, include, for qualifying deposits; “the minimum time period for the deposit to be held in the bank account of the Chinese ceding company has been shortened from one year to one quarter; and the requirement under the Draft Notice that the aggregate amount of liabilities treated as collateralised for multiple reinsurance contracts entered into by a single Chinese ceding company must not exceed the total amount of the deposit (the “Aggregation Rule” has been removed).”
Essentially, the Final Version relaxes some of the requirements relating to the collateral provided by offshore reinsurance entities participating in the Chinese marketplace.
China is seen as a market that holds huge growth potential for insurers and reinsurers across the world, but protectionism measures and the regulatory environment has seen some global reinsurers pull-back from the region in recent times.
