HONG KONG--(BUSINESS WIRE)--
With the expected adoption of China’s second-generation solvency system,
the China Risk-Oriented Solvency System Conceptual Framework (C-ROSS),
approaching, a new A.M. Best report states that Chinese non-life
insurers should focus on enhancing earnings quality to better prepare to
withstand headwinds and adapt to new dynamics brought about by the
pending change in the solvency regime.
This special report, titled “Sustainable Profitability Is Key for
Healthy Capitalization of China’s Non-Life Insurers,” aims to present
A.M. Best’s view on the impact of implementing a risk-based solvency
regime on the Chinese non-life insurance industry, and to investigate
the major drivers for improving the market’s risk-adjusted
capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR).
“The fast-changing operating environment in China and developing
regulatory requirements may present unprecedented opportunities and
challenges for market participants,” said A.M. Best Associate Financial
Analyst James Chan. “However, recent BCAR scores, which are derived by
dividing adjusted capital by the corresponding net required capital,
suggests insurers with larger market shares have weaker risk-adjusted
capitalization than their smaller peers, thus creating downward pressure
on the capital adequacy of the overall market.”
Although industry statistics suggest that non-life premium revenue
growth in China will slow, it is still expected to maintain double-digit
growth that is faster than GDP growth in the short to medium term. As
insurance demand has grown sharply in recent years, insurers have sought
to strengthen their solvency level, typically employing external capital
support via capital injection and subordinated debt issuance.
“Apart from external capital support, it is very important for insurers
to increase capital organically to support the long-term viability and
sustainability of their business growth,” said A.M. Best Senior
Financial Analyst Vivian Cheung.
The report also explores the impact of several key performance drivers,
namely combined ratio, net investment yield and net premium growth rate,
on insurers’ BCAR scores.
To access a complimentary copy of this report, including a
Chinese-language version, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=226364.
A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company.
A.M. Best Company is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc.ALL RIGHTS
James Chan, +852-2827-3424
Senior Financial Analyst
Sharkey, +(1) 908-439-2200, ext. 5159
Peavy, +(1) 908-439-2200, ext. 5644
President, Public Relations
Source: A.M. Best