BEIJING, May 13 (Xinhua) -- Chinese insurers may be approved to trade credit risk mitigation tools and credit protection instruments to further diversify their tools for risk control, reported xinhua-run Shanghai Securities News Monday.
The report citing a source said that trading of credit derivatives such as credit risk mitigation agreement and warrant as well as credit protection agreement and warrant may be open to insurance companies in China.
Currently, Chinese insurance firms are not that experienced in trading financial derivatives. Under such circumstances, the source quoted disclosed that insurers may only be permitted to purchase credit risk mitigation and credit protection instruments for risk management.
according to the report, only a part of insurance companies are likely to be nodded to take part in the credit risk mitigation tools and credit risk protection instruments business and the qualified insurers shall be capable of operating credit derivatives business and managing credit risks.
An asset management personnel of a Chinese insurer said given the market demand, some industry experts suggested two years ago opening access for credit derivatives trading business to insurers, which might to some extent be helpful for them to rein in risks.
In the future, detailed regulations or regulatory requirements are still needed once the access is open to insurers.
For instance, risk parameters of credit risk mitigation tools and credit protection instruments shall be defined for insurers, from which they can take reference in evaluating the minimum capital requirements under requirements of China’s second generation of plan on constructing solvency capacity regulation system.
As for the activity of participation by insurers, it is expected to be up to the future market supply, the report citing several industry insiders said. (Edited by Duan Jing, duanjing@xinhua.org)
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