China’s financial regulator issued new guidelines on Friday (Aug 9) aimed at improving the solvency adequacy ratio of online property insurers in the country, with these insurers required to maintain a comprehensive solvency adequacy ratio of at least 120% for the last four consecutive quarters and a risk rating of B or above.
These insurers will also have to maintain a core solvency adequacy ratio of at least 75%, the National Financial Regulatory Administration said.
These new guidelines will make it easier for some insurers who meet these requirements to offer insurance online in provinces and cities they do not have branch offices in, provided that they inform local authorities that they intend to do so.
Online motor insurers will be restricted from doing so until proper evaluation by the NFRA, and firms offering agriculture, marine and specialist insurance will be barred from expanding their operating areas online.
Despite this, eight insurers — Funde P&C, Anhua Agricultural Insurance, Dubon, Everest P&C, Qianhai Mercantile Exchange, BPIC, Sinosafe Insurance and Anxin P&C have still not met the criteria, reported The Economic Observer, with seven receiving a rating of C and one receiving a risk rating of D.
These insurers will have to meet the new requirements by the end of 2024, said the NFRA.
The new guidelines were aimed at supporting digital transformation of China’s property insurers and encouraging small and medium-sized property insurance firms to expand their business online on the premise of compliant operation and controllable risks, the NFRA said in a statement.
“The property and casualty insurance market has been very competitive in recent years, and thus strict rules around the sale of specialist insurance across regions are meant to prevent disorderly competition and stabilise the market, so consumers are protected,” Yang Zeyun, a lecturer at Beijing Union University’s Department of Finance, told Beijing Business Daily.
With specialist lines having complex risks that also differ by region, it would be difficult to manage the risks that come with online cross-regional sales and maintain effective claims management, he added.
China ranked at 16 out of 29 countries in Swiss Re’s 2020 Insurance Digitalisation Index, with a strong increase in digital insurance penetration from 0.2% in 2011 to 8.4% in 2021. Consumers are increasingly spending more on insurance, with over 40% of high-income households saying that they planned to spend more than 20,000 yuan ($2,796) on insurance in the next year.
