On 17 July 2018, the China Banking & Insurance Regulatory Commission (CBIRC) published its framework for determination of re-insurance risk charges applicable under C-ROSS to transactions between domestic insurance companies and Hong Kong insurance companies (Framework).
Key elements of the Framework are:
- In transactions where a domestic China direct (primary) insurer (China Cedant) reinsures its risks with an ‘Accredited Hong Kong Reinsurer’, then the C-ROSS reinsurance risk charge RF0 applicable to such transaction (i.e. to the China Cedant’s reinsurance recoverables) will be deemed to be 0.087 (zero point zero eight seven), meaning in effect that, for the purposes of C-ROSS, the Accredited HK Reinsurer, without being required to place collateral within China, will in fact be treated as though it were to a CBIRC-authorised foreign reinsurer which had placed collateral within China.
- Any Hong Kong reinsurer which fulfils all the following criteria will be deemed by CBIRC to be an Accredited Hong Kong Reinsurer:
- conducts its business within Hong Kong and which is authorised and regulated by the Hong Kong Insurance Authority (IA) as a specialist reinsurer;
- self-reports to the IA, on a quarterly basis, its solvency reports and data as required under the IA’s standard calculation methodology;
- holds an internationally-recognised credit rating of A-minus or better; and
- meets all requisite solvency standards and ratios (Minimum Solvency Ratio).
Minimum Solvency Ratio, for the purposes of paragraph 2(4), means:
for non-life Accredited Hong Kong Reinsurers, 200%;
for life Accredited Hong Kong Reinsurers, 150%; and
in respect of an Accredited Hong Kong Reinsurer which conducts both non-life and life reinsurance business, then for the non-life reinsured business, 200%, and for the life reinsured business 150%.
The Framework will be effected, and be implemented, for an initial one year period commencing on 2 July 2018.