China to standardize insurance on credit risks

BEIJING - To contain risk in the financial sector, China's insurance regulator issued a draft of rules to standardize insurance businesses and cushion against credit risks.

Insurers that offer protection against credit risks may have a core solvency adequacy ratio of at least 75 percent in the most recent quarter, while their comprehensive solvency adequacy ratio should stay above 150 percent, according to the draft released by China Insurance Regulatory Commission.

Companies that fail to meet the requirement should stop offering new insurance on credit risks, according to the draft.

Insurance companies will also be prohibited from offering credit risk insurance to companies rated AA or lower.

To ensure that insurance companies have the ability to pay off their obligations, the draft also details the upper limit of outstanding liabilities.

The companies should also establish a mature system of internal risk control and conduct due diligence on the client's willingness and ability to pay.

The draft is currently open for revision, and the public will have until June 25 this year to provide opinions.