December 15, 2017 / 11:26 AM / a year ago

China issues draft rules for insurance asset liability management

BEIJING, Dec 15 (Reuters) - China’s insurance regulator issued draft rules on Friday to strengthen supervision of how insurers manage their assets and liabilities, introducing a grading system to determine the level of investment and fundraising firms can make.

Spot checks and third-party assessments will be used to assess the capabilities of insurance firms to manage assets and liabilities, based on cash flow and cost matching, the China Insurance Regulatory Commission (CIRC) said in an online statement.

The draft regulations, which will be implemented next year, are meant to guarantee the insurance industry maintains its “steady development” while preventing “systemic risks in an increasingly complicated” environment, the statement said.

China this year has embarked on a crackdown of risky activities in the country’s financial system.

Some insurers have adopted aggressive operations and investment strategies, creating possible liquidity problems and causing greater exposure to risk, CIRC said in a statement in July, announcing the forthcoming rules changes.

Under the draft rules, the regulator will issue comprehensive ratings on insurance companies’ asset liability management in four categories, ranging from A to D.

For those insurers receiving the lowest ratings, targeted measures will be taken to restrict business activities, including the proportion of funds that will be available for stock, real estate, and other investment. Those companies also will be prohibited from applying to issue new products within a certain period of time.

The rules also will apply to branches of foreign insurance companies set up in China, the statement said.

Reporting by Lusha Zhang and Matthew Miller, editing by David Evans

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