Administrative Provisions on the Solvency of Insurance Companies
Administrative Provisions on the Solvency of Insurance Companies
Administrative Provisions on the Solvency of Insurance Companies
Order of the China Insurance Regulatory Commission [2008] No. 1
July 10, 2008
Administrative Provisions on the Solvency of Insurance Companies, which were adopted at the executive meeting of the China Insurance Regulatory Commission on June 30, 2008, are hereby promulgated and shall come into force as of September 1, 2008.
Chairman: Wu Dingfu
Administrative Provisions on the Solvency of Insurance Companies
Chapter I General Provisions
Article 1 To intensify supervision and administration over the solvency of insurance companies, protect the interests of the insurants and to promote sound, steady and sustainable development of the insurance industry, these Provisions are formulated in accordance with the Insurance Law of the People's Republic of China.
Article 2 The term "insurance companies" as mentioned in these Provisions refers to the lawfully established insurance companies and branches of foreign insurance companies which are engaged in the commercial insurance businesses.
The term "solvency of insurance companies" refers to the insurance companies'competency to repay liabilities.
Article 3 An insurance company shall have capital corresponding with its risks and business scale and shall ensure that its solvency ratio is not less than 100%.
The solvency ratio, namely the capital adequacy rate, refers to the ratio between an insurance company's actual capital and the minimum capital.
Article 4 An insurance company shall establish a solvency management system and intensify the capital restraint so as to ensure adequate solvency.
The board of directors and the management of an insurance company shall be in charge of the solvency management of the company. The management of a branch of a foreign insurance company shall be in charge of the solvency management of the branch. An insurance company or a branch of a foreign insurance company shall designate one senior manager to take charge of the specific affairs relevant to the management of the solvency of the company or branch.
Article 5 The China Insurance Regulatory Commission (hereinafter referred to as the CIRC) shall formulate dynamic solvency supervision criterions and a supervision mechanism on the basis of the risks, comprehensively assess, supervise and check the solvency of insurance companies and take supervision measures in pursuance of law.
Chapter II Solvency Assessment
Article 6 An insurance company shall, in accordance with the Rules of the CIRC on preparation and submission of insurance company solvency reports, regularly assess its solvency, calculate the minimum capital and actual capital, and conduct dynamic solvency tests.
The insurance company shall assess its solvency on the basis of risks.
Article 7 The term "minimum capital of an insurance company" refers to the amount of capital that it shall have, in accordance with the provisions of the CIRC, for responding to the impact of asset and insurance acceptance risks on the solvency of the company.
Article 8 The term "actual capital of an insurance company" refers to the margin between the recognized assets and the recognized liabilities.
The term "recognized assets" refers to the assets that an insurance company recognizes in accordance with the provisions of the CIRC when it assesses its solvency.
The enumeration approach may apply to the recognized assets.
The term "recognized liabilities" refers to the liabilities that an insurance company recognizes in accordance with the provisions of the CIRC when it assesses its solvency.
Article 9 An insurance company shall, in accordance with the provisions of the CIRC, conduct a dynamic solvency test, and forecast and make comments on its solvency trends in different situations in a specified time period of the future.
Article 10 A foreign insurance company with several branch institutions in China shall, assess the entire solvency of all its branch institutions in China in a consolidated manner.
Chapter III Solvency Reports
Article 11 An insurance company shall, in accordance with rules and relevant provisions of the CIRC on the preparation and submission of insurance company solvency reports, prepare and submit solvency reports and ensure the authenticity, accuracy, completeness and compliance of the information reported.
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