14 March 2017Insurance

China’s regulator introduces offshore deposit system for reinsurers

The China Insurance Regulatory Commission (CIRC) has introduced system that will require foreign reinsurers to deposit funds with unaffiliated domestic commercial banks in a move that it said will mitigate the credit risk arising from foreign carriers operating in the country.

The regulator seems to have indicated that it has introduced the system partly because of a lack of faith in international credit ratings, which it said were insufficient in determining the credit risk of offshore reinsurers alone.

It said that as the number of offshore reinsurers operating in the country has increased, the credit risk has become apparent.

Domestic insurers using reinsurers can seek collateral to be post or letters of credit or other CIRC recognized security measures, the regulator said. The funds would be held by a domestic commercial bank rated no lower than AA-.

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