C-ROSS: A Major Reform of China’s Insurance Regulatory System

No. 59 , June 2015 C-ROSS: A Major Reform of China's Insurance Regulatory System By Junbo Xiang+ The China Risk Oriented Solvency System, or C -ROSS, entered the transitional stage of implementation as its 17 solvency regulatory rules were released in Beijing on 13 February 2015. This means a risk -oriented, internationally comparable solvency system reflecting Chinese insurance market realities is now in place. A revolutionary reform C-ROSS is a milestone in the reform and development of China's insurance regulation. In the words of Xiang Junbo, Chairman of the China Insurance Regulatory Commission, it will have a revolutionary impact on China's insurance market. A project to facilitate the transformation and upgrading of China's insurance industry China's insurance market has undergone three consecutive years of rapid growth since 2012. The year 2014 saw the fastest growth since the international financial crisis, with national premium income hitting RMB 2 trillion for the first time, 17.5 per cent higher than the previous year. The industry's profit also hit a record high, registering RMB 200 billion, achieving 106 per cent growth year on year. China's insurance industry moved up in the global ranking in terms of market size from No. 6 in 2012 to No. 3 in 2014. As one of the most important insurance markets in the world and with the 'new normal', China's insurance industry has to adapt to the new situation. C -ROSS is expected to enable insurers to expand and grow in a more rational way as insurers bear in mind both risks and capital in their pursuit of such development goals as size, speed and returns. With the advent of the new system, insurers will transform and upgrade their development pattern by reshaping their strategy planning, operation mode and risk management. They are expected to develop in a more balanced and sustainable way under more refined management. A major step in the all -round, deeper reform and regulation modernisation The principle guiding the Chinese government?s governance reform in recent years has been 'Giving the market a decisive role in resource allocation'. It is on this prin ciple that the CIRC has based C-ROSS. The CIRC is trying to streamline the relationship between market and regulation, trimming the list of items requiring administrative approval, and giving the market greater freedom and incentives to develop and innovat e, while effectively identifying, preventing and mitigating risks. Solvency regulation sets the bottom line for risks and is the key t o risk control of the industry. + Chairman, China Insurance Regulatory Commission.