GuShiio.com Because insurance groups involve a wide range of business fields and many member companies, they can easily form relatively concentrated large-scale risk exposures to the same entity, investment products, business areas, etc.
State Administration of Financial Supervision: Insurance groups should hold sufficient capital and liquidity buffers for concentration risks
(Photo source: Visual China)
Blue Whale News, February 8 (Reporter Shi Yu)In order to further strengthen the supervision of insurance groups and improve the risk management capabilities of insurance groups, the State Administration of Financial Supervision recently issued the “Guidelines for the Supervision of Concentration Risk of Insurance Groups”(hereinafter referred to as the “Guidelines”).
Judging from the background of the formulation of the Guidelines, insurance groups can easily form relatively concentrated large-scale risk exposures to the same entity, investment products, business areas, etc. because they involve a wide range of business fields and many member companies. At present, relevant regulatory requirements are scattered in various documents such as insurance group supervision, solvency, and fund utilization, and unified and standardized concentration risk supervision rules have not yet been issued.
As a result, the State Administration of Financial Supervision has studied and formulated the “Guidelines” to provide guidance for insurance groups to strengthen concentration risk management. The purpose is to guide insurance groups to establish prudent business concepts, strengthen concentration risk management, and effectively maintain the bottom line of preventing systemic risks.
The “Guidelines” consist of 5 chapters and 28 articles, including 5 parts: general provisions, concentration risk management system, concentration risk management policies and procedures, management information system and report disclosures and supplementary provisions. The main contents include clarifying concentration risk management principles, standardizing concentration risk management processes, promoting insurance groups to establish multi-dimensional indicator and limit management systems, and improving information disclosure and reporting systems.
Concentration risk identification should cover various related items on the balance sheet and off-balance sheet items that substantially bear risks such as guarantees and commitments, covering all risk types, business lines and entities.
Insurance group companies have established a concentration risk indicator system to set appropriate concentration risk limits for various concentration risks based on their own risk preferences, risk status, management level and capital strength, and clarify the hierarchical limit transmission mechanism of group member companies. Management specifications such as hierarchical management and control mechanisms and quota occupancy rules.
Insurance group members should avoid over-reliance on specific assets, counterparties, customers, regions or markets, and fully analyze and judge the possible impacts of specific industries that are susceptible to macro policies and fluctuations in the economic cycle. If the concentration risk limit is exceeded due to changes in market prices and other reasons, it shall be reported or approved in accordance with relevant regulations, and an effective over-limit management mechanism shall be established, risk analysis of over-limit situations shall be strengthened, necessary risk dispersion measures shall be taken, and risks shall be resolved and disposed of in a timely manner.
At the same time, insurance group companies have established a centralized risk emergency and mitigation management mechanism, clarifying the division of responsibilities for various centralized risk emergency management, emergency management procedures, risk mitigation tools and other normative requirements.
When major risks have occurred or are expected to occur in various concentration risks, which may have a significant impact on the group’s liquidity, solvency, reputation, etc., the insurance group company must formulate emergency management and risk mitigation plans and strictly implement them to effectively control and mitigate risks. The Guidelines clarify that insurance groups should hold sufficient capital and liquidity buffers for concentration risks.
“The “Guidelines” clarify the concentration risk management standards of insurance groups and provide systematic guidance for insurance groups. They are of great significance to improving the concentration risk management capabilities and levels. They are a powerful measure to further improve the effectiveness of supervision and promote insurance groups to strengthen risk management. rdquo; The State Administration of Financial Supervision stated that in the next step, we will solidly promote the implementation of the Guidelines and promote high-quality development of the industry.
