Insurers need 4-5 years for risk control
Print Edition
INSURANCE companies in China may need four to five years to build an effective risk management system under the country’s new solvency rules, PricewaterhouseCoopers said in a report yesterday.
Only a third of insurance companies have set up a sound risk management system that can analyze risks and exercise stress tests to help in making corporate decisions, PwC said after surveying 76 insurers in China who boasted a combined market share exceeding 80 percent.
PwC said insurers need to invest more in risk management after the China Insurance Regulatory Commission this year implemented a new solvency rule, known as C-ROSS, that assesses their solvency based on risks rather than the size of their business as in the previous system.
C-ROSS sets a minimum capital requirement based on insurance, market and credit risks augmented by measures to enhance insurers’ internal management of capital and liabilities.
“Generally speaking we found companies starting to understand and implement the new rules,” said Jimi Zhou, a partner with PwC.
“But many companies still take risk management as a compliance issue rather than a responsibility, and there has been insufficient investment and support from top managers.”
Zhou pointed out that insurance companies should prepare for a “long-term battle” that could last at least four to five years to gradually improve and implement risk management measures.
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