Insurance Authority and China Banking and Insurance Regulatory Commission implement preferential treatment to promote the development of Hong Kong reinsurance industry

17 July 2018

The Insurance Authority (IA) reached a consensus with the China Banking and Insurance Regulatory Commission (CBIRC) that under the “China Risk Oriented Solvency System” (C-ROSS), when a Mainland insurer cedes business to a qualified Hong Kong professional reinsurer, the capital requirement of the Mainland insurer will be reduced (preferential treatment).

The preferential treatment is based on the Equivalence Assessment Framework Agreement on Solvency Regulatory Regime (Agreement) signed between the former China Insurance Regulatory Commission and the former Office of the Commissioner of Insurance on 16 May 2017 for the insurance regulators in two places to carry out equivalence assessment on the solvency regulatory regimes. Both sides agreed to recognize temporarily the insurance solvency regulatory regime of each other as the same or similar to that of another during the four-year transitional period before the completion of the equivalence assessment. Based on the “mutual equivalence recognition”, both sides will consider giving each other’s industry preferential treatment to strengthen co-operation between the insurance sectors in two places.

Mr Chen Wenhui, Vice-Chairman of the CBIRC, said, “The CBIRC supports Hong Kong being Mainland’s overseas risk management platform to assist Mainland enterprises in ‘going global’. On the basis of the ‘mutual equivalence recognition’, the preferential factor under C-ROSS will be applicable to high-quality Hong Kong reinsurers, which will foster the development of the reinsurance business in Hong Kong.”

Mr John Leung, Chief Executive Officer of the IA, said, “The preferential treatment will facilitate the co-operation between the Mainland and Hong Kong in cross-border reinsurance business, enabling the Hong Kong insurance industry to assist Mainland enterprises more effectively in diversifying and managing risks, including supporting Mainland enterprises’ participation in the infrastructure and investment projects under the Belt and Road Initiative. The preferential treatment will also help sharpen the competitive edge of the Hong Kong insurance industry and strengthen Hong Kong’s position as a reinsurance hub in Asia.”

For details of the preferential treatment, please refer to the notice published by the CBIRC (Chinese version only).

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