Moody’s Investors Service has realigned the solvency ratio rating triggers for 22 rated Chinese insurers, following revision to capital measurement under the China Risk-Oriented Solvency System (C-ROSS) second phase.
The ratings agency says the change in reported solvency ratios better reflects their economic capital.
The China Insurance Regulatory Commission started work on C-ROSS II in 2017, in response to four perceived risks currently faced by the country’s insurance sector, including cash management, solvency adequacy, governance failings and poor risk-transfer management.
The scheme is supposed to usher in a new solvency supervisory regime. The aim is to standardise previously subpar management of solvency by China’s insurance industry.
Moody’s has updated the rating drivers to reflect this change and consider capital adequacy levels relative to their similarly rated peers, as well as what is needed to support their business growth and mitigate relevant underwriting and investment risks.
The agency has produced a list of Chinese insurers and how the change could affect them. For example, China Life’s rating could be downgraded if the insurer’s capitalisation significantly and consistently weakens, with its capital adequacy remaining below 8% or its comprehensive solvency ratio below 200%.
Ping An Life’s rating could be downgraded if the insurer’s capitalisation continues to weaken, with its capital adequacy falling below 4% or its comprehensive solvency ratio below 180%.
CPIC Life’s rating could be downgraded if the company’s comprehensive solvency ratio falls below 180%.
