Off-site supervision measures for insurance companies were introduced: the assessment results affect market access and product approval

The Paper's reporter Hu Zhiting

There is a unified working system and standard for off-site supervision of the insurance industry.

On 20 January, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Interim Measures for Off-site Supervision of Insurance Companies (hereinafter referred to as the Measures), which came into effect on 1 March 2022.

As a regulatory provision for off-site supervision of insurance companies, the Measures consist of 7 chapters and 39 articles, which are divided into general provisions, division of duties and work requirements, information collection and collation, daily monitoring and regulatory assessment, application of assessment results, information archiving and by-laws.

The person in charge of the relevant department of the Banking and Insurance Regulatory Commission said that the off-site supervision system can be divided into two aspects: the first is the work process and mechanism, and the second is the indicators and methods of regulatory assessment. Considering that there are large differences in the business scope and business model of property insurance companies, reinsurers and life insurance companies, as well as risks, it is necessary to formulate targeted monitoring indicators and evaluation guidelines separately, and there are many relevant contents. Therefore, the Interim Measures mainly regulate and clarify the work process and mechanism of off-site supervision, and the guidelines for guiding off-site supervision monitoring and evaluation work are formulated and issued separately.

In terms of the division of responsibilities, the Measures make it clear that the institutional supervision department is responsible for studying and formulating the system provisions, work processes and work standards for off-site supervision; carry out off-site supervision of the legal person institutions of insurance companies directly supervised and the systemic risks of the insurance industry, and guide the dispatched institutions to carry out off-site supervision.

In addition, other relevant regulatory departments should strengthen coordination and cooperation with institutional regulatory departments, provide data data, policy interpretation and other related support for the construction and improvement of off-site supervision system, and carry out off-site supervision;

The Measures require that regulators should collect all kinds of information reflecting the operation and management of insurance companies and risk status from regulators, insurance companies, industry organizations, industry information infrastructure, etc. according to the needs of off-site supervision.

In terms of daily monitoring and regulatory assessment, regulators shall identify the risk points of each business field and business link according to the business type and business model of the insurance company, and compile and establish a risk monitoring indicator system for the daily dynamic monitoring and risk early warning of the business development of the insurance company.

Speaking of the relationship between off-site supervision and comprehensive rating of solvency risks, the head of the relevant department of the Banking and Insurance Regulatory Commission said that off-site supervision serves institutional supervision, emphasizing the combination of quantitative and qualitative analysis, which is a comprehensive supervision covering the whole process and whole process of insurance company operation. The comprehensive rating of solvency risk is an integral part of the second generation of solvency, which serves the supervision of solvency and basically adopts quantitative evaluation. Solvency regulation is essentially capital regulation, and the regulatory focus is on capital adequacy. In general, the two have their own emphases and complement each other.

The Measures point out that if the regulator discovers that an insurance company has violated laws and regulations or relevant regulatory provisions, it shall order corrections within a time limit, and take regulatory measures and impose administrative penalties in accordance with law. Regulators can feedback the results of off-site regulatory assessments to insurance companies through regulatory talks, regulatory circulars, and the issuance of risk warning letters and regulatory opinions, and put forward regulatory requirements.

For the results of off-site supervision assessment, according to the Measures, regulators should take them as important considerations when carrying out administrative approval work such as market access and product approval.

Attached are the Interim Measures for Off-site Supervision of Insurance Companies

Order of the China Banking and Insurance Regulatory Commission [2022] No. 3

Chapter I General Provisions

Article 1 These Measures are formulated in accordance with the Insurance Law of the People's Republic of China, the Provisions on the Administration of Insurance Companies and other relevant laws and regulations, in order to establish and improve the off-site supervision system of insurance companies, clarify the division of labor of off-site supervision responsibilities, standardize the work process of off-site supervision, and improve the efficiency of off-site supervision.

Article 2 Off-site supervision of insurance companies refers to the continuous supervision process in which the regulatory authority continuously monitors and analyzes the business operations of insurance companies, provides risk protection and services for the real economy, assesses the overall risk status of insurance companies and the insurance industry, and adopts targeted regulatory measures by collecting various types of information such as corporate governance, solvency, operation management, business and financial data of insurance companies and insurance industries.

Off-site supervision is an important means of insurance supervision, and regulators should give full play to their central role in improving regulatory efficiency.

Article 3 The regulatory authorities referred to in these Measures refer to the CBIRC and its dispatched agencies.

"Insurance companies" as used in these Measures includes the legal entities of insurance companies and their branches. Among them, the legal person institution of an insurance company refers to a commercial insurance company established with the approval of the insurance regulatory authority under the State Council and registered in accordance with law. Branch offices of insurance companies refer to provincial -level (including municipalities directly under the Central Government, cities separately listed in the plan) and prefectural and municipal central branches established by the legal entity of insurance companies in accordance with the law, excluding branches, sales departments, marketing service departments and various exclusive institutions.

Article 4 Regulatory authorities shall follow the following principles in carrying out off-site supervision of insurance companies:

(1) The principle of comprehensive risk supervision. The off-site supervision should take risk as the core, comprehensively identify, monitor and evaluate the risk status of insurance companies, timely carry out risk early warning, and take corresponding regulatory measures to promote the sustainable and healthy development of insurance companies.

(2) Principles of coordination of supervision. Institutional supervision departments and other relevant regulatory departments shall establish off-site supervision linkage work mechanisms, strengthen information sharing and work coordination, and fully integrate regulatory forces.

(3) Principles of categorical supervision. To carry out off-site supervision, the insurance company should reasonably allocate regulatory resources, classify policies, and take timely and prudent regulatory measures according to factors such as business type, business model, risk status, and degree of systemic importance.

(4) The principle of unification of regulatory standards. To carry out off-site supervision, a unified off-site supervision goal should be set, a unified work process and work standards should be established, and the supervision personnel should be guided to perform their off-site supervision duties in an orderly and efficient manner.

Chapter II: Division of Duties and Work Requirements

Article 5 The institutional supervision department shall be responsible for studying and formulating the system provisions, work processes and work standards for off-site supervision; carry out off-site supervision of the legal person institutions of insurance companies directly supervised by them and the systemic risks of the insurance industry, and guide the dispatching institutions to carry out off-site supervision.

Article 6: Other relevant regulatory departments should strengthen coordination and cooperation with institutional supervision departments, providing relevant support such as data materials and policy interpretations for the establishment and improvement of off-site supervision systems and systems, and carrying out off-site supervision.

Article 7 The dispatching agency shall be responsible for carrying out off-site supervision over the regional risks of the legal person institutions of the insurance companies under its jurisdiction, the branches of insurance companies within its jurisdiction and the insurance industry.

Article 8: Institutional supervision departments and other relevant regulatory departments shall establish off-site supervision linkage work mechanisms between themselves and sending agencies, strengthen horizontal and vertical regulatory linkages, and actively promote the effective sharing of regulatory information.

Article 9: Off-site supervision shall form an effective connection with regulatory measures such as administrative approval and on-site inspections, and achieve cooperation and complementarity with key regulatory areas such as corporate governance, solvency, use of funds, and consumer rights and interests protection, and jointly build an efficient and robust insurance regulatory system, providing strong support for the formulation and implementation of regulatory policies.

Article 10: The workflow of off-site supervision is divided into four stages, such as information collection and collation, daily monitoring and regulatory assessment, application of assessment results, and information archiving.

Article 11 Regulatory authorities shall, on the basis of the allocation of supervisory personnel and the requirements for recusal in performing their duties, specify that special personnel are responsible for the off-site supervision of a single insurance company, ensure that the off-site supervision division of labor is in place, the responsibilities are in place, and regularly train and rotate off-site supervision personnel.

Chapter III: Information Collection and Collation

Article 12 Regulatory authorities shall, in accordance with the needs of off-site supervision, collect all kinds of information reflecting the operation and management of insurance companies and risk status from regulatory agencies, insurance companies, industry organizations, industry information infrastructure, etc.

Article 13 Regulatory authorities shall make full use of the statements and reports collected by various types of insurance regulatory information systems to collate and form information that can be used for off-site supervision.

Regulatory agencies should periodically collect information on on-site inspections, administrative punishments, research, petitions, reports, complaints, administrative approvals, criminal-related cases, etc. formed in daily supervision work, and use it for off-site supervision after collating.

Article 14 Regulatory authorities shall make full use of all kinds of information already submitted by insurance companies; for information that needs to be supplemented by insurance companies for off-site supervision, it may be supplemented and collected from insurance companies by sending letters of inquiry, interviews, visits, etc.

The regulator may, if it deems it necessary, require insurance companies to provide relevant information that has been audited or verified by intermediary service agencies such as accounting firms, law firms, tax accounting firms, actuarial consulting agencies, credit rating agencies and asset appraisal agencies.

Article 15 Regulatory authorities shall strengthen communication and coordination with industry organizations such as the Insurance Industry Association, the Insurance Society, and the Insurance Asset Management Association, as well as industry institutions such as the Insurance Guarantee Fund Company, the Bancassurance Credit Company, the China Insurance Investment Company, and the Shanghai Insurance Exchange, and make full use of their work results to sort out and form information that can be used for off-site supervision.

Regulators should make full use of industry information infrastructure such as insurance policy registration platforms to provide big data analysis support for off-site supervision.

Article 16 Regulatory authorities shall continuously improve the process of collecting and sorting out off-site regulatory information, strengthen the integration of various insurance regulatory information systems, and increase the efficiency of information collection, collation and analysis.

Article 17 Regulatory authorities shall supervise and urge insurance companies to implement regulatory requirements, earnestly strengthen the management of information submission, and ensure that the information submitted is true, accurate, timely and complete; for those who fail to submit information in accordance with the requirements of off-site supervision work, administrative penalties may be imposed on insurance companies and responsible persons in accordance with law depending on the severity of the circumstances.

Chapter IV: Daily Monitoring and Regulatory Assessment

Article 18 The regulatory authority shall, on the basis of the business type and business model of the insurance company, identify the risk points in each business field and business link, and compile and establish a risk monitoring indicator system for the daily dynamic monitoring and risk early warning of the operation and development of the insurance company.

Article 19 Regulatory authorities shall adhere to the method of combining qualitative analysis and quantitative analysis, and through comprehensive analysis of all kinds of information collected, combined with the early warning of risk monitoring indicators, effectively identify the potential risks of insurance companies, and determine the results of off-site supervision and assessment of specific business areas, business links and overall risks.

Article 20 In principle, the regulatory authority shall conduct an off-site supervision assessment of the overall risk status of the legal person institutions and branches of insurance companies at least once a year.

Regulatory authorities should comprehensively consider factors such as the allocation of regulatory resources, the development of the insurance industry, the operating characteristics and systemic importance of insurance companies, determine the appropriate risk monitoring frequency, and conduct special off-site supervision assessments for specific business areas and business links.

Article 21: Regulatory authorities carry out off-site regulatory assessments, the content of which includes, but is not limited to:

(1) The basic situation of the insurance company, the business development and major events during the assessment period;

(2) The main problems, risks and assessment results found in this off-site supervision assessment, as well as the changing trend;

(3) Recommendations on regulatory measures and regulatory opinions;

(4) Issues and matters that off-site supervisors believe should be prompted or discussed;

(5) In view of the problems and risks found in the last off-site supervision assessment, the company implements the regulatory requirements, implements rectification and disposes of risks.

Article 22 On the basis of off-site supervision of individual insurance companies, regulatory authorities shall pay attention to the impact of the macroeconomic and financial systems on the insurance industry, as well as the generation and transmission of homogeneous risks within the insurance industry, and carry out systematic regional off-site supervision.

Article 23: Institutional supervision departments shall establish mechanisms for sharing the results of off-site supervision and assessments. Institutional supervision departments and dispatched agencies shall, in accordance with their respective regulatory responsibilities, promptly notify the results of off-site regulatory assessments, regulatory measures to be taken and other information within the regulatory authorities.

Article 24 The institutional supervision department shall, on the basis of the business scope and institutional level of the insurance company, formulate guidelines for risk monitoring and off-site supervision and assessment applicable to property insurance companies, life insurance companies and reinsurance companies, clarify the definition of risk monitoring indicators and the method of off-site supervision and assessment, and promptly revise them in accordance with the changes and developments in the insurance industry and financial markets.

Chapter V: Application of Assessment Results

Article 25 Regulatory authorities shall, in accordance with relevant laws and regulations, promptly adopt corresponding regulatory measures in response to the problems and risks discovered in risk monitoring and off-site regulatory assessments; and according to the needs of risk supervision, require insurance companies to carry out stress tests and formulate emergency response plans, and guide and urge insurance companies and their shareholders to effectively prevent and resolve hidden risks.

Article 26 Where a regulatory authority discovers that an insurance company has violated laws and regulations or relevant regulatory provisions, it shall order corrections within a time limit, and adopt regulatory measures and impose administrative penalties in accordance with law.

Article 27 Regulatory authorities may feedback the results of off-site regulatory assessments to insurance companies through regulatory interviews, regulatory circulars, and the issuance of risk reminder letters and regulatory opinions, and put forward regulatory requirements.

Regulatory authorities may, as appropriate, select some or all of the results of off-site regulatory assessments and regulatory requirements to be announced to the public, giving play to the role of supervision and restraint of the public and public opinion, and promoting timely and serious rectification by insurance companies.

Article 28: On the basis of the results of off-site supervision and assessment, regulatory authorities shall, on the basis of the results of off-site supervision and assessment, put forward project establishment suggestions to the on-site inspection departments for key institutions, key businesses, key risk areas, and major risk points that need to carry out on-site inspections; after the project is established, provide relevant data and materials for off-site supervision, promptly track the progress and results of inspections, and compare them with the results of off-site supervision and assessment.

Article 29: Regulatory authorities shall take the results of off-site regulatory assessments as important considerations when carrying out administrative examination and approval work such as market access and product approval.

Article 30: In the course of carrying out off-site supervision, regulatory authorities analyze and find that there are matters that require attention in areas such as regulatory regulations and regulatory policies, they shall promptly report the relevant circumstances within the regulatory authorities.

Chapter VI: Information Archiving

Article 31: Regulatory authorities shall promptly archive and manage information collected in the course of off-site supervision, work materials formed, risk monitoring and off-site regulatory assessment reports, and so forth.

Article 32: Regulatory bodies shall strengthen the management of information archives for off-site supervision, clarifying the relevant authority for archival storage, inquiry, and confidentiality.

Article 33: Staff engaged in off-site supervision have an obligation to keep information on off-site supervision confidential, and must not disclose it to the outside world without necessary decision-making procedures. Off-site regulatory information mainly includes:

(1) Data and information materials submitted by insurance companies in accordance with off-site supervision requirements;

(2) Information on all types of regulatory work used to carry out off-site supervision;

(3) Carrying out off-site supervision of the formation of risk monitoring indicators, regulatory assessment results, and relevant reports;

(4) Other information that is not suitable for external disclosure.

Chapter VII Supplementary Provisions

Article 34: Regulatory bodies shall carry out off-site post-supervision evaluations, conduct objective evaluations of the circumstances and effectiveness of off-site supervision organizations, discover problems, analyze the causes, and continuously improve off-site supervision system provisions and work processes. Specific rules for post-regulatory evaluation are formulated separately.

Article 35 Guidelines for risk monitoring and off-site supervision and assessment of property insurance companies, life insurance companies and reinsurance companies shall be separately formulated and issued by the corresponding institutional regulatory departments.

Article 36 The institutional supervision departments referred to in these Measures refer to the internal departments of the Banking and Insurance Regulatory Commission responsible for the supervision of various types of insurance companies. Other relevant regulatory departments refer to the internal departments of the CBRC responsible for on-site inspection of insurance companies, solvency supervision, corporate governance supervision, insurance fund utilization supervision, consumer rights protection, major risk events and case handling, regulations, statistical information and risk monitoring.

Article 37 These Measures shall apply to the off-site supervision of mutual insurance organizations, policy insurance companies, insurance group (holding) companies and insurance asset management companies by reference.

Article 38 The CBIRC shall be responsible for the interpretation and revision of these Measures.

Article 39: These Measures take effect on March 1, 2022.

Responsible editor: Zheng Jingxin Photo editor: Zhang Tongze