Solvency system insures city’s status
SHANGHAI’S status as a global insurance center will rise following the Chinese insurance sector’s shift to a risk-based solvency system and deeper reforms in the bond market, AIA Group CEO and President Mark Tucker told Shanghai Daily yesterday.
“The newly implemented Chinese risk-oriented solvency system achieves a focus on risks, the quality of being international, and the ability to support market order,” said Tucker. “It has been the most significant and necessary of the reforms put in place.”
The new solvency system, known as C-ROSS, officially started this year, and it assesses insurers’ solvency based on risks rather than the size of their business unlike in the previous system.
The C-ROSS sets minimum capital requirement based on insurance, market and credit risks augmented by measures to enhance insurers’ internal management of capital and liabilities.
Tucker said the C-ROSS is risk-oriented, market-based and internationally comparable, and will not discriminate against foreign insurers unlike in the old system.
“I think this system risk-based, so whether you’re a domestic or international company, you’ll have the same opportunities and the same challenges,” said Tucker.
“It’s a system where you are incentivized, effectively as a participant of the market, to do the right things. And I think this is definitely a significant and important improvement.”
Tucker also said that reforms in the bond market will help Shanghai become a first-class global financial center.
“The depth of the bond market is important, the bond market needs to be deep and transparent in its operations,” Tucker emphasized.