Hong Kong reinsurers receive China preferential treatment
The China Banking and Insurance Regulatory Commission (CBIRC) and the Insurance Authority (IA) of Hong Kong have reached an agreement to allow preferential treatment for qualified reinsurers in Hong Kong.
As part of the agreement, mainland insurance companies that cede business to qualified reinsurers in Hong Kong will benefit from a generally lower reinsurance credit risk charge under the China Risk Oriented Solvency System (C-ROSS) regime, AM Best noted.
This move is a first step in the Equivalence Assessment Framework Agreement on Solvency Regulatory Regime between the former Office of the Commissioner of Insurance and the former China Insurance Regulatory Commission (CIRC) in May 2017, according to the ratings agency. Based on the agreement, there will be a four-year transitional period during which the C-ROSS and the IA regimes will be mutually recognized as the same or similar.
The preferential treatment is expected to encourage mainland insurers to give priority to high- quality Hong Kong reinsurers over other offshore reinsurers in placing reinsurance, which regulators expect will contribute to Hong Kong’s competitive edge as a risk management hub in Asia providing reinsurance capacity and expertise, AM Best noted. More broadly, Hong Kong’s reinsurance industry can offer underwriting know-how and related services as part of a wider suite of professional risk management to support re/insurance demand arising from mainland enterprises that engage in the BRI (Belt and Road Initiative) and other global projects. Indeed, the IA plans to launch a facilitation platform to connect different stakeholders, AM Best added.
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