China’s Regulator Tightens Rules on Credit Insurance Providers
What’s new: China’s banking and insurance regulator issued new rules Tuesday on credit insurance and guarantee insurance contracts, raising requirements on insurers’ solvency margin ratios and risk control practices.
Implementation of the new rules is expected in the short term to reduce the number of insurers eligible to provide financing credit insurance. They are also intended to encourage insurance companies to adjust their business structures to reduce the proportion of personal consumption business and increase the share of small and micro business financing, the China Banking and Insurance Regulatory Commission (CBIRC) said.
Under the new rules, insurance companies should have a core solvency ratio of no less than 75% for two consecutive quarters to be eligible to provide credit guarantee insurance. The solvency ratio is a measure of the risk an insurer faces of claims that it cannot absorb. The current rules require a 75% ratio for only the latest quarter.
The background: China is pushing banks to advance more credit to support small and micro businesses, which were among the hardest hit by the lockdown caused by the Covid-19 pandemic.
The nation’s insurance companies are also under stress. Growth in insurance premiums plunged more than 13% in the first quarter, while credit insurance claims jumped 50%, according to the CBIRC.
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