China regulator proposes revisions on reinsurance

It seeks to tighten its watch especially on concentration and overseas risks.

The China Banking and Insurance Regulatory Commission (CBIRC) has drafted its proposed revisions to reinsurance regulations, an announcement read.

The regulator proposes six major revisions, including pushing insurers to come up with reinsurance strategies that would lower risks, and expounding on the purpose of the reinsurance agreement, retention policy, reinsurance policy, amongst others.

The regulator also seeks to tighten its supervision of reinsurance lines particularly on concentration, overseas risks, and liquidity management. 

In addition, direct insurers who also carry out reinsurance will be pushed to establish an independent reinsurance department with relevant documents processed electronically. If the reinsurance premium income in the previous year exceeds $15.7m (CNY100m), the department should be manned by no less than three full-time personnel who are independent of the direct insurance line. 

If the reinsurance premium income in the previous year exceeds $47.1m (CNY300m), the department should have no less than five full-time personnel.

On the other hand, insurance branches will be prohibited from doing reinsurance services.

Moreover, insurers will be urged to choose reinsurance counterparties and brokers, and they are not allowed to utilise reinsurance to transfer profits or evade taxes.