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【Financial Str. Release】CBIRC caps insurers' investment on BBB, lower rating corp bonds at max 10pct of issuance

November 26, 2021


Abstract : China Banking and Insurance Regulatory Commission (CBIRC) adjusted recently credit rating requirements on corporate bonds (corp bonds) invested by insurers to prevent related investment risks, reported Xinhua Finance.

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BEIJING, Nov. 26 (Xinhua) -- China Banking and Insurance Regulatory Commission (CBIRC) adjusted recently credit rating requirements on corporate bonds (corp bonds) invested by insurers to prevent related investment risks, reported Xinhua Finance.

CBIRC issued on November 19 a circular requiring corporate bonds invested by insurance companies to be classified as fixed-income assets or equity investment and put under related regulatory supervision.

As the document provides, insurers which invest their capital in non-financial state-owned or controlled enterprise bonds and bonds of private firms shall abide by the following credit rating requirements.

If an insurer boasts comprehensive solvency ratio of 200 percent and beyond by the end of the previous quarter and (or its trustee) has related credit risk management capability, the credit rating requirement on corporate bonds it invests in is cancelled.

For insurance companies or their trustees with at least 120 percent of comprehensive solvency ratio and credit risk management capability by the end of the quarter prior, the non-financial corporate bonds they invested in and the bond issuers shall be ones with BBB or higher ratings rated by credit rating agencies in China.

If an insurer fails to meet the above-mentioned requirements, has significant hidden risks, or is listed among targets under key regulatory supervision, under mandatory custody or taken over in accordance with the law, the non-financial corporate bonds it invests in shall have AA or higher ratings offered by credit rating agencies in China and the bond issuer shall be rated as ones with A or beyond ratings.

Based on these, an insurer's book balances of an individual non-financial corporate bond with BBB and lower ratings rated by credit rating institutions in China shall not exceed 10 percent of the issuance value of the specific batch of bond.

What's more, insurers' book balances of non-financial corporate bonds issued by the same issuer and with BBB and lower ratings given by credit rating agencies in China shall not exceed 20 percent of the audited net assets of the non-financial corporate bond issuer in the last fiscal year. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)

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Keyword: insurer bond CBIRC Financial Str. Release

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