Source: China Banking Regulatory Commission

Recently, the China Banking and Insurance Regulatory Commission issued the "Notice on Strengthening Actuarial Supervision over Life Insurance" (hereinafter referred to as the "Notice"). The heads of relevant departments of the China Banking and Insurance Regulatory Commission answered reporters' questions on relevant issues.

1. What is the background of the "Notice"?

my country’s life insurance actuarial supervision started with the "Insurance Law" of 1995 and gradually expanded to include actuarial regulations, chief actuary system, actuarial reports, and embedded value reports, laying the foundation for the steady development of the life insurance industry. In recent years, in order to promote the return of life insurance to the source of protection, the China Banking and Insurance Regulatory Commission will continue to strengthen the construction of actuarial systems as an important part of the reform of life insurance rate policies, and through the establishment of off-site monitoring mechanisms to increase the supervision of liability business, and prevent industry risks. , Has played an important role in promoting the sustainable and healthy development of the industry. However, with the rapid development of the life insurance industry, major issues such as statutory liability reserve supervision need to be further strengthened, dividend insurance dividend distribution and benefit demonstration mechanisms need to be further standardized, and off-site monitoring mechanisms need to be further improved. In order to further strengthen the actuarial supervision of life insurance, better protect the legitimate rights and interests of insurance consumers, promote the high-quality development of the life insurance market, and serve the structural reform of the financial supply side, the China Banking and Insurance Regulatory Commission has issued the "Notice".

2. What are the main contents of the "Notice"?

One is to further strengthen the supervision of statutory liability reserves. Introduce a liability reserve coverage index, incorporate it into the off-site monitoring indicator system, and link it with product supervision and other regulatory measures, and clearly require life insurance companies to submit insurance clauses and premium rates for approval or filing, the most recent quarter-end liability reserve The coverage rate shall not be less than 100%, and the role of the statutory liability reserve in the supervision system shall be effectively brought into play.

The second is to regulate the development of the dividend insurance market. The dividend insurance business has developed rapidly in the past two years, and problems such as opaque dividend distribution and exaggerated presentation benefits have risen. In order to further standardize the dividend distribution demonstration mechanism of participating insurance, better guide customers' reasonable expectations, and prevent misleading sales and vicious competition, the "Notice" revised and improved the method for the demonstration of dividend insurance benefits, clarified the upper limit of the demonstration interest rate, and unified the dividend distribution ratio as 70%.

The third is to improve the off-site monitoring mechanism. The relevant content of the quarterly liability business information sheet in the "Notice of the China Insurance Regulatory Commission on Doing a Good Job in Reporting Data on the Personal Insurance Industry" (Bao Jian Ren Sheng Insurance [2017] No. 263) has been adjusted, and the liability reserve coverage ratio and universal Intensify the supervision of liability business, including the basic situation of insurance accounts and investment-linked insurance accounts.

3. How does the liability reserve coverage ratio play a role in supervision?

The numerator of the liability reserve coverage ratio is the sum of assets after deducting other liabilities and expense adjustments. The denominator is the statutory liability reserve, which mainly measures whether the company has enough assets to cover the statutory liability reserve. It not only reflects the company’s asset-liability matching level, but also Reflect the company's ability to deal with future insurance liability payments. The assessment of statutory liability reserves plays a fundamental and decisive role in the future payment of liabilities of life insurance companies and the prevention of spread loss risks. It also indirectly affects the development model and market order of the life insurance industry.

In order to strengthen the supervision of statutory liability reserves, the China Banking and Insurance Regulatory Commission improved the formation mechanism of the assessment interest rate of the liability reserve for the life insurance industry in 2019, established a dynamic adjustment mechanism for assessment interest rates, and lowered the assessment interest rate of ordinary long-term annuities from 4.025% to 3.5%. On this basis, the introduction of liability reserve coverage ratio and linking the liability reserve coverage ratio with product supervision measures are aimed at further strengthening the supervision of statutory liability reserve funds and firmly maintaining the bottom line of industry risks.

4. What aspects does the off-site monitoring mechanism mainly cover?

In order to strengthen off-site monitoring and move the risk threshold forward, the China Banking and Insurance Regulatory Commission has established an annual actuarial reporting system in 2009 and revised and improved it in 2018 to further increase liability supervision, including: optimizing the report on the assessment of liability reserves Framework, establish a liability and asset matching reporting system, and strengthen the liability-side cash flow stress testing system. On this basis, a quarterly monitoring mechanism has been supplemented, and the "Notice on Doing a Good Job in the Reporting of Personal Insurance Business Data" (Bao Jian Ren Sheng Insurance [2017] No. 263), requiring companies to report their liability business quarterly Information, a comprehensive understanding of the company’s cash flow, embedded value, new business value, business structure, and main products on sale.

The "Notice" focused on improving the quarterly monitoring mechanism. In addition to including the coverage of liability reserves into the monitoring indicator system, it also strengthened the monitoring of universal insurance and other businesses, focusing on preventing industry cash flow and spread loss risks.

5. What is the impact of the "Notice" on the market?

The "Notice" clarified the upper limit of the dividend distribution demonstration interest rate of the dividend insurance, and unified the dividend distribution ratio to 70%, which is conducive to preventing the risk of industry spreads and preventing the company from engaging in vicious competition through the dividend distribution demonstration. In the long run, the "Notice" clearly releases the signal of strict supervision and reflects the "insurance surname guarantee" orientation, which is conducive to the long-term and healthy development of the life insurance industry. The "Notice" further strengthens the supervision of statutory liability reserves, fully reflects the core principles of prudential supervision, and helps guide the life insurance industry to strengthen risk awareness and maintain the bottom line of preventing systemic risks. The "Notice" improves the off-site monitoring mechanism, which is conducive to a more comprehensive, timely and objective grasp of the liability status of the life insurance industry, and enhances the scientificity and effectiveness of regulatory policies.