Draft rules for asset liability management

The China Insurance Regulatory Commission (CIRC) issued draft rules recently to strengthen supervision of how insurers manage their assets and liabilities, introducing a grading system to determine the level of investment and fundraising firms can make.

Spot checks and third-party assessments will be used to assess the capabilities of insurance firms to manage assets and liabilities, based on cash flow and cost matching, CIRC said in an online statement.

The draft regulations, which will be implemented in 2018, are meant to guarantee the insurance industry maintains its “steady development” while preventing “systemic risks in an increasingly complicated” environment, the statement said.

Under the draft rules, the regulator will issue comprehensive ratings on insurance companies’ asset liability management in four categories, ranging from A to D.

For those insurers receiving the lowest ratings, targeted measures will be taken to restrict business activities, including the proportion of funds that will be available for stock, real estate, and other investment. Those companies also will be prohibited from applying to issue new products within a certain period of time.

The rules also will apply to branches of foreign insurance companies set up in China, the statement said.