Fitch: Optimizing Solvency Regulation Standards in China Can Alleviate Capital Pressure on Insurance Companies

Fitch Ratings believes that the mainland insurance industry, which is emerging from the epidemic, is facing challenges of domestic market fluctuations and declining interest rates. China has lowered the risk capital calculation factor for insurance company sub-category investment assets and revised the solvency calculation standards, which will alleviate the capital pressure on insurance companies and enhance the stability of their solvency adequacy ratio regulatory indicators. Fitch pointed out that in the context of unfavorable investment environment and slowing profit growth, the optimization measures (new regulations) issued by the China Banking and Insurance Regulatory Commission on September 10, 2023, to some extent, responded to the challenges faced by some insurance companies in maintaining stability in solvency. The impact of the new regulations on the credit status of insurance companies is expected to be neutral, as Fitch expects that rated insurers will not significantly increase their investments in the investment categories covered by the new regulations. In addition, Fitch evaluates the capital strength of insurance companies using its proprietary model and believes that the potential impact of the improvement in the solvency adequacy ratio regulatory indicator of insurance companies will be minimal. (jl/w)