A.M. Best has released a new briefing that explores the impact of China’s second-generation solvency regime, the China Risk Oriented Solvency System (C-ROSS), on insurance companies operating in the country.
C-ROSS, which was implemented by the China Insurance Regulatory Commission (CIRC) in February 2015, is effective immediately; however, a transitional period will allow insurance companies to follow the current solvency regime while simultaneously submitting a solvency report based on the new requirements.
The briefing states that direct insurers will likely need to revise their reinsurance programmes, or panel of insurers, in order to better manage their solvency requirement arising from reinsurance credit risk under C-ROSS.
The credit risk charge on reinsurance recoverables is expected to bring significant change to the reinsurance marketplace.
A.M. Best has stated that it expects more reinsurance placements to be diverted to onshore reinsurance companies, with a corresponding reduction of offshore reinsurance.
