“You see, our company is very solvent.” When insurance salesmen promote sales, they always emphasize this sentence to show that their company is reliable. Solvency is not only related to the operation stability of insurance companies, but also an important core index of insurance supervision. With the implementation of the new solvency rules, insurance companies will face stricter supervision.
The reporter of China first finance and economics learned that, in line with the “second generation of solvency” (China’s risk oriented solvency regulatory system), which was formally implemented in 2016, the new “solvency management regulations of insurance companies” (hereinafter referred to as the “management regulations”) revised after 13 years was issued on January 25 and will be formally implemented on March 1.
According to the “threshold” of solvency compliance in the “administrative provisions”, the reporter of China first finance and economics combed the latest solvency reports of nearly 200 insurance institutions published by China Insurance Industry Association, and found that if the latest published reports of insurance institutions were taken as reference, six insurance companies were not up to the standard at present, namely: Changan liability insurance, Centennial life insurance, Junkang life insurance and Qianhai life insurance In addition to the negative solvency adequacy ratio of China France life insurance, the other reasons are that the comprehensive risk rating results are below category B. In addition, Anxin property insurance was punished by the regulatory authorities for its negative solvency adequacy ratio in October last year and stopped its new auto insurance business. Therefore, its indicators at the end of October also failed to meet the standard.
Seven insurance companies fail to meet the standard
Compared with the version under the “solvency generation” in 2008, the biggest change of the “administrative provisions” is to expand the solvency regulatory indicators from the single “solvency adequacy ratio no less than 100%” in the past to three parts: core solvency adequacy ratio, comprehensive solvency adequacy ratio and comprehensive risk rating.
According to the administrative provisions, insurance companies need to meet the three major requirements of core solvency adequacy ratio not less than 50%, comprehensive solvency adequacy ratio not less than 100%, and comprehensive risk rating of class B and above.
According to the latest solvency report of nearly 200 insurance institutions disclosed by China Insurance Industry Association, the reporter of China first finance and economics found that the performance of six insurance institutions in the third quarter of 2020 did not meet the above standards, including one property insurance company of Chang’an liability insurance company and five life insurance companies of Centennial life insurance, Junkang life insurance, Qianhai life insurance, Sino French life insurance and Bohai life insurance. The reporter inquired about the official websites of the six insurance companies. As of press release, no solvency report for the fourth quarter of 2020 has been released.
The comprehensive risk ratings of the six insurance companies disclosed in the third quarter (i.e. the second quarter of 2020) are all below category B, so they are not up to the standard line of the “management regulations”. Among them, Sino French life insurance is the lowest grade D. From the 50% and 100% standard line of core solvency adequacy ratio and comprehensive solvency adequacy ratio, the other five of the above six insurance companies are in the standard state, except for China France life insurance, which has been running out of liquidity for a long time.
Comprehensive risk rating is related to many factors, including solvency adequacy ratio, liquidity coverage ratio, operational risk, capital utilization risk and so on. According to the solvency reports of the above six insurance companies, there are various reasons why the comprehensive risk rating is not up to standard. For example, Chang’an liability insurance explained that it was due to the temporary decline of its liquidity coverage index at the end of the second quarter; Qianhai life insurance and Bohai life insurance respectively said that it was due to its own operational risk and capital use risk; Centennial life insurance and Junkang Life Insurance Co., Ltd However, it is due to the fact that the comprehensive solvency adequacy ratio is not continuously higher than 120%. However, due to the long-term absence of capital fund, China France life insurance company has experienced liquidity depletion since April 2017, and its staffing is insufficient, almost paralyzed, so it is in urgent need of capital fund “blood” resurrection.
(source: according to the public information of China first finance and Economics)
In addition to the six insurance companies, although the Solvency Index of Anxin property insurance is still in the state of reaching the standard in the third quarter of 2020, the decision on administrative supervision measures issued by the CIRC at the beginning of this year revealed its “Waterloo” in solvency in October. According to the data in the letter of decision, the core and comprehensive solvency adequacy ratio of Anxin property insurance at the end of October 2020 was – 125.7%, which was ordered by the regulatory authorities to increase capital, stop accepting new business of auto insurance, and reduce the salary of directors, supervisors and senior managers by 20%.
In addition, it is clear in the administrative provisions that insurance companies whose core solvency adequacy ratio is lower than 60% or comprehensive solvency adequacy ratio is lower than 120% will be the key verification objects. From this perspective, the comprehensive solvency adequacy ratio of 120% at the end of the third quarter of Fude life insurance is just “stepping on the line”, while the comprehensive solvency adequacy ratio of Taibao Allianz health and other companies in the third quarter of 2020 is not too much higher than the “threshold” of key attention.
What will happen if solvency is not up to standard? The management regulation also gives the answer. For the companies whose solvency adequacy ratio is not up to the standard, the regulatory measures are divided into the necessary measures and the measures selected according to the risk causes. The measures that must be taken include: regulatory talks; requiring insurance companies to submit plans to prevent the deterioration of solvency adequacy ratio or improve risk management; limiting the salary level of directors, supervisors and senior managers; limiting dividends to shareholders, etc. In addition to the above-mentioned necessary measures, the regulatory authorities can also, according to the specific reasons for their failure to meet the solvency adequacy ratio standard, take such measures as ordering them to increase capital, ordering them to stop some or all of their new businesses, ordering them to adjust their business structure, and restricting the establishment of new branches. For those whose solvency has not been significantly improved or further deteriorated after taking the above measures, the regulatory authorities shall take such regulatory measures as taking over and applying for bankruptcy in accordance with the law.
For class C and D insurance companies whose core solvency adequacy ratio and comprehensive solvency adequacy ratio are up to the standard, but one or more of the operational risk, strategic risk, reputation risk and liquidity risk are greater or more serious, the regulatory authorities should take regulatory measures according to the risk causes and risk degree.
What is the impact of solvency on consumers?
Solvency is related to the operation stability of insurance companies, so it is particularly concerned by insurance consumers.
If the solvency of the insurance company is not up to the standard, what is the impact on the insured consumers? Can insurance cover it? Do consumers need to pay attention to the Solvency Index of insurance companies when they take out insurance?
Wang Xiangnan, deputy director of the Research Center for insurance and economic development of the Chinese Academy of Social Sciences, told China first finance and economics that in the solvency assessment, the assets, liabilities and owner’s equity of insurance companies of various types and periods are made conservative and robust assumptions, so the solvency of insurance companies is slightly substandard, which basically does not mean that they are difficult to fulfill their policy responsibilities normally. China’s insurance regulation is comprehensive, strict and more forward-looking, so the insurance companies that fail to meet the standards can usually survive the difficult period and return to normal by modifying insurance products, adjusting investment fields, replenishing company capital, improving management skills and changing development strategies.
“In addition, China’s insurance license is still relatively scarce, so insurance companies have a general level of early warning of repayment, which should be able to attract new shareholders to inject capital quickly. If the regulatory authorities expect that the repayment difficulties of an insurance company are serious or will continue, they can take over the company and ensure its normal operation. There have been several successful experiences in this respect. Since the resumption of the insurance industry, the policy responsibilities of China’s insurance industry have been fully fulfilled. China established a protection fund system in 2005, which provides a high level of protection for consumers’ policy rights and interests. ” Wang Xiangnan said.
However, Wang Xiangnan reminded that insurance consumers should also pay attention to the company’s solvency, because all areas of the financial industry are breaking the “rigid cashing”, and “it can not be ruled out that one day in the future, when rectifying or clearing the problem insurance companies, their promised excessive investment income will be” 10% off. ”
So, is the higher the solvency adequacy ratio, the better? A senior person in the insurance industry told China first finance and economics that the solvency adequacy ratio is a “time point”. Under the “second generation of solvency”, business structure, business volume, capital and other factors will affect the solvency adequacy ratio. For example, at the end of the quarter, when an insurance company just increases its capital, the solvency adequacy ratio will be very high at the end of the quarter. However, the higher the solvency adequacy ratio is, the better it is. The persistently high solvency adequacy ratio may also indicate that the company’s capital utilization efficiency is not high. When sorting out the solvency report, the reporter of China first finance found that the comprehensive risk rating of companies with solvency adequacy ratio of more than 1000% is not all class A.
Wang Xiangnan also believes that when the solvency of an insurance company is at a high level, no matter how high it is, it will hardly affect its ability to fulfill its policy obligations; some policies have a long term and choose a company with high solvency when purchasing, so the solvency of the company may not be very high in decades. Therefore, it is appropriate for consumers to pay attention to solvency. For those consumers who have already been insured, if they find or expect that the company’s solvency has problems, it is recommended not to surrender because the loss of surrender should be greater than that of entering the final liquidation stage.
Reprint indicated source：Spark Global Limited information