Caixin
Jun 07, 2019 05:07 PM
FINANCE

Key Insurance Metric Improves for First Time in Three Years

Photo: VCG
Photo: VCG

A key metric that measures insurance companies’ ability to pay their liabilities rose 3.3 percentage points in the first quarter of 2019 from the previous quarter, marking the first time it has stabilized and improved in three years.

The strong reading for the comprehensive solvency margin ratio came amid a Beijing campaign to reduce risks in the sector after several years of aggressive underwriting by many of the nation’s insurers.

The China Banking and Insurance Regulatory Commission’s (CBIRC) issued its latest results after its solvency supervision committee analyzed the solvency and risk situation in the insurance industry in the first quarter in 2019 at a meeting chaired by Zhou Liang, vice chairman of the commission.

The committee reviewed results of the comprehensive risk ratings of insurance companies and regulatory measures for some companies and began the next stage of solvency supervision and risk prevention and control work.

At the end of this year’s first quarter, the comprehensive solvency adequacy ratio of 178 insurance companies was 245.3%, up 3.3 percentage points from the previous quarter. The core solvency adequacy ratio was 233.4%, up 2.8 percentage points from the previous quarter. Among property and casualty insurance companies, life insurance companies and reinsurance companies being considered, the comprehensive solvency adequacy ratios were 271.8%, 238.3%, and 335.7%, respectively.

The regulator requires China’s insurers to maintain solvency ratios above 100% or risk being subject to penalties.

Since the implementation of a second-generation solvency system in 2016, the comprehensive solvency ratio in the insurance industry has been on a downward trend. That number now appears to have stabilized and even rebounded slightly.

Compared with the previous quarter, the comprehensive solvency ratio for property and casualty insurance decreased by 2.2 percentage points. But both life insurance and reinsurance rebounded to varying degrees, the former by 3.3 percentage points and the latter by 52.7 percentage points.

A recent Moody’s report showed China’s life insurance and reinsurance companies’ ability to pay their liabilities declined in 2018, while property insurers improved. The change reflected life insurance companies’ shifting structure to guarantee-type products, and property and casualty insurers’ development of non-vehicle insurance business.

Contact reporter Ren Qiuyu (qiuyuren@caixin.com)


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