National Financial Regulatory Administration: Insurance group member companies should avoid excessive reliance on specific assets, trading counterparts, clients, regions, or markets

According to the Zhitong Finance APP, on February 8, the General Office of the National Financial Regulatory Administration issued a notice on the issuance of the "Guidelines for the Supervision of Concentration Risk in Insurance Groups." The guidelines mention that member companies of insurance groups should avoid excessive reliance on specific assets, counterparties, clients, regions, or markets, and fully analyze and assess the impacts that specific industries, which are susceptible to macro policies and economic cycle fluctuations, may have. For cases where concentration risk limits are exceeded due to market price changes and other reasons, they should be reported or approved according to relevant regulations, and an effective management mechanism for exceeding limits should be established, strengthening risk analysis of exceeding limits, taking necessary risk diversification measures, and timely resolving and handling risks.

The original text is as follows:

General Office of the National Financial Regulatory Administration

Notice on Issuing the "Guidelines for the Supervision of Concentration Risk in Insurance Groups"

Jin Ban Fa [2025] No. 10

To all insurance groups (holding) companies:

In order to further enhance the risk management level of insurance groups and promote the sound operation of insurance groups, the Financial Regulatory Administration has researched and formulated the "Guidelines for the Supervision of Concentration Risk in Insurance Groups," which are hereby issued for compliance.

General Office of the National Financial Regulatory Administration

January 26, 2025

Guidelines for the Supervision of Concentration Risk in Insurance Groups

Chapter 1 General Principles

Article 1 In order to standardize the concentration risk management of insurance group companies and promote the sound operation of insurance groups, these guidelines are formulated in accordance with the "Insurance Law of the People's Republic of China," the "Measures for the Supervision and Administration of Insurance Group Companies," and other laws, regulations, and regulatory provisions.

Article 2 The concentration risk referred to in these guidelines means the risk that a single risk or risk portfolio of the consolidated member companies of an insurance group may have a significant impact on the normal operation of the group after aggregation at the insurance group level, either directly or indirectly.

Article 3 These guidelines apply to the concentration risk management of insurance group companies legally established within the territory of the People's Republic of China.

Article 4 The concentration risk management of insurance groups follows the following principles:

(1) Prudence Principle. Insurance group companies, based on consolidated management, should effectively identify, reasonably assess, and prudently manage various types of concentration risks that the insurance group may face, according to the substance over form and penetration principles.

(2) Matching Principle. Insurance group companies should establish matching concentration risk management strategies and systems based on the management model and business complexity of the insurance group, and prudently set concentration risk indicators and limits according to the capital level and risk tolerance of the insurance group.

(3) Unity Principle. Concentration risk management adheres to the principle of unity from top to bottom, maintaining the integration and coordination of various concentration risk limits and management measures under the unified risk management policy of the insurance group, so that the concentration management requirements can permeate all member companies within the group, achieving synergy with the group's strategic development goals and consistency with the overall risk management objectives.

(4) Dynamic Principle. Insurance group companies should dynamically adjust concentration risk control strategies based on regulatory policies and regulations, company operations, risk preferences, and changes in internal and external environments, establishing a mechanism for retrospective updates of concentration risk indicators and limits to achieve dynamic management of concentration risk Article 5 The insurance group company shall incorporate concentration risk management into its comprehensive risk management system, establishing a sound organizational structure, management system, and information system that are commensurate with the scale and complexity of its business, effectively identifying, measuring, assessing, monitoring, reporting, controlling, or mitigating concentration risk.

Chapter 2 Concentration Risk Management System

Article 6 The insurance group company shall establish a complete organizational structure for concentration risk management, clearly defining the management responsibilities of the board of directors, senior management, relevant departments, and member companies, and constructing a mutually connected and effectively balanced management operation mechanism.

Article 7 The board of directors of the insurance group company shall bear the ultimate responsibility for concentration risk management and shall perform the following duties:

(1) Approve the concentration risk management system;

(2) Approve risk appetite and risk tolerance;

(3) Supervise senior management in the effective management of concentration risk;

(4) Review reports related to concentration risk, understand changes and management of concentration risk, and propose management opinions and suggestions based on the status and development trends of concentration risk, including but not limited to adjusting business structure, business development speed, and supplementing capital;

(5) Approve the content of concentration risk information disclosure.

Article 8 The senior management of the insurance group company shall bear the responsibility for the implementation of concentration risk management and shall perform the following duties:

(1) Review the concentration risk management system and submit it for board approval;

(2) Review risk appetite and risk tolerance, as well as the process for handling excess limits, and submit it for board approval;

(3) Approve various concentration risk indicators and limits;

(4) Promote relevant departments to implement the concentration risk management system and limits;

(5) Regularly report changes in concentration risk and management status to the board of directors;

(6) Review the content of concentration risk information disclosure and submit it for board approval.

Article 9 The insurance group company shall clarify the leading department for concentration risk management, responsible for coordinating various tasks. Specific responsibilities include:

(1) Organizing relevant departments to implement specific management responsibilities for concentration risk;

(2) Formulating and revising the concentration risk management system and submitting it for senior management review;

(3) Based on the group's risk appetite, formulating and updating the group's concentration risk indicators and limits management system, including calculation methods, data scope, etc., and submitting it for senior management approval;

(4) Continuously monitoring changes in concentration risk and management status, and regularly reporting to senior management and the board of directors' risk management committee;

(5) Drafting processes for handling excess concentration risk and submitting them for senior management review;

(6) Drafting content for concentration risk information disclosure and submitting it for senior management review;

(7) Promoting the construction of information systems related to concentration risk management.

Article 10 The insurance group company shall provide overall guidance for the concentration risk management of major member companies. Major member companies of the insurance group shall establish and improve their own concentration risk management systems, effectively ensuring the implementation of the insurance group's concentration risk management requirements at the member company level. Specific responsibilities include:

(1) Clearly defining their own concentration risk management structure and division of responsibilities and filing with the group company;

(2) Formulating and revising the concentration risk management system and filing with the group company; (3) Organize and implement the group company's requirements for concentration risk management and limit control;

(4) Assist the group company in implementing concentration risk information disclosure work;

(5) Participate in the construction of information systems related to concentration risk management of the group company.

Article 11 The insurance group company shall formulate a concentration risk management system based on these guidelines, regularly assess the system, and revise it in a timely manner when necessary. The content of the system shall at least include:

(1) Management structure and division of responsibilities;

(2) Management methods and work processes;

(3) Categories and measurement methods of concentration risk;

(4) Risk limits and control measures;

(5) Concentration risk management information systems and data governance mechanisms;

(6) Supervision and audit, statistical reporting, and information disclosure requirements.

Chapter 3 Concentration Risk Management Policies and Procedures

Article 12 The insurance group company shall establish a concentration risk identification mechanism, clarify the methods and management requirements for identifying concentration risks, comprehensively identify the concentration risks that the insurance group may face, refine the dimensions and granularity of concentration risk management, and accurately reflect the overall picture of concentration risks of the insurance group.

Concentration risk identification should cover all relevant items on the balance sheet as well as off-balance sheet items that substantively bear risks, including guarantees and commitments, covering all types of risks, business lines, and entities.

Article 13 The insurance group company shall establish a concentration risk measurement mechanism, adopt differentiated concentration risk measurement methods based on the characteristics of various concentration risks, and comprehensively apply model or non-model methods to measure the impact of concentration risks based on financial losses, investment returns, operational stability, and other applicable perspectives.

Article 14 The insurance group company shall establish a concentration risk indicator system, set appropriate concentration risk limits for various concentration risks based on its own risk appetite, risk status, management level, and capital strength, and clarify the hierarchical limit transmission mechanism, layered control mechanism, and limit occupation rules for group member companies.

Insurance group member companies should avoid excessive reliance on specific assets, counterparties, clients, regions, or markets, and fully analyze and assess the potential impacts of specific industries that may be affected by macro policies and economic cycle fluctuations. For cases where concentration risk limits are exceeded due to market price changes or other reasons, they should report or seek approval according to relevant regulations and establish effective mechanisms for managing excess limits, strengthen risk analysis of excess situations, take necessary risk diversification measures, and promptly resolve and dispose of risks.

Article 15 The insurance group company shall establish a concentration risk monitoring mechanism, clarify the division of responsibilities for monitoring various concentration risks, reporting paths, and other management specifications, continuously monitor the execution of concentration risk limits and concentration risk events, conduct forward-looking analyses of potential impacts, and timely adjust relevant investment and operational activities.

Article 16 The insurance group company shall set warning values for concentration indicators, establish a concentration risk early warning mechanism, and clarify the division of responsibilities for early warning of various concentration risks, triggering standards, investigation and control, reporting paths, and other management specifications.

Article 17 The insurance group company shall establish a concentration risk emergency and mitigation management mechanism, clarifying the division of responsibilities for emergency management of various concentration risks, emergency management procedures, risk mitigation tools, and other normative requirements When various concentration risks have already occurred or are expected to occur significantly, potentially causing major impacts on the group's liquidity, solvency, reputation, etc., insurance group companies must formulate emergency management and risk mitigation plans and strictly implement them to effectively control and mitigate risks.

Insurance groups should hold sufficient capital and liquidity buffers against concentration risks.

Article 18: Insurance group companies shall establish a concentration risk assessment management mechanism, using both quantitative and qualitative methods, to assess the overall concentration risk status of the group at least once every six months.

Risk assessments include the effectiveness of the concentration risk management mechanism, the status of concentration risks, the level of risk management, and management optimization measures or plans. The assessment results serve as an important basis for the insurance group's operational decision-making and continuous improvement of concentration risk management.

Article 19: Insurance group companies should fully utilize stress testing tools in the identification, measurement, and assessment of concentration risks, conducting stress tests on the impact of concentration risks under different stress scenarios, the interaction and joint effects of concentration risks with other risks, and assessing the adverse effects that may arise on the company's operations in extreme situations. Based on the results of stress tests, timely optimization of the concentration risk management mechanism should be carried out.

Article 20: Insurance group companies shall incorporate concentration risk management into the scope of internal audit supervision and management, conducting at least one internal audit of concentration risk management annually to supervise the implementation of concentration risk management systems and evaluate the operation and effectiveness of concentration risk management.

Chapter 4 Management Information Systems and Reporting Disclosure

Article 21: Insurance group companies shall establish a concentration risk data governance mechanism, clarifying the statistical caliber, information sources, reporting standards, and timeliness norms for various concentration risk data, organizing and supervising member companies of the insurance group to implement concentration risk data governance requirements, ensuring the quality of concentration risk data.

Article 22: Insurance group companies should build information systems related to concentration risk management to achieve systematic and online management of the identification, measurement, monitoring, early warning, and reporting of concentration risks, strengthening concentration risk management through information system construction.

Article 23: Insurance group companies shall establish a concentration risk reporting mechanism, clarifying the reporting path and frequency requirements for concentration risks, reporting the overall concentration risk status and management situation of the group to the board of directors or the board's risk management committee at least once every six months, and promptly reporting significant concentration risk events and risk control situations to the board of directors.

Article 24: Insurance group companies shall include concentration risk indicator statistical tables in the consolidated quarterly reports and submit them to the National Financial Regulatory Administration on time.

Article 25: Insurance group companies shall include the status of concentration risk management in the annual consolidated management report. The report content includes the basic situation of concentration risk management, the execution status of concentration risk limits and management policy procedures, and the status of concentration risks.

Article 26: Insurance group companies shall establish a concentration risk information disclosure mechanism, disclosing annual concentration risk management information on their official website before June 15 each year, including but not limited to the organizational system of concentration risk management, management strategies and their execution status, risk status, and significant concentration risk events Chapter 5 Supplementary Provisions

Article 27 These guidelines are interpreted by the National Financial Regulatory Administration.

Article 28 These guidelines shall take effect from the date of publication.

This article is compiled from the official website of the "National Financial Regulatory Administration," edited by Liu Jiayin of Zhitong Finance.