Abstract
The China Risk-Oriented Solvency System (C-ROSS), the new risk-oriented regulatory framework for the Chinese insurance industry, was fully implemented at the beginning of 2016. In this paper, we identify the main features of the C-ROSS and compare its rules and standards with those of the Risk-Based Capital (RBC) system in the United States, the Solvency II system in the European Union, and the Swiss Solvency Test (SST) in Switzerland. Using a conceptual framework proposed by Cummins et al. (J Insur Regul 11:427–447, 1994) and Holzmuller (Geneva Pap Risk Insur 34:56–77, 2009), we analyse C-ROSS according to 11 criteria and find that the system scores are substantially better than those of RBC, and more or less as good as those of the Solvency II or SST systems. We also contrast the strengths and weaknesses of C-ROSS with those of the RBC, Solvency II and SST systems. Our analyses are of value to regulators developing risk-based supervisory frameworks, and to insurers engaging in business in any of the four geographic regions considered.
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This figure summarises the CIRC’s insurance company solvency regulatory rules6 and categorises these rules under the three-pillar framework.
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Notes
CIRC (2015a).
Swiss Re (2015b).
UBS (2016).
CIRC (2012).
CIRC (2013).
CIRC (2015b).
Oliver Wyman (2014).
Ernst and Young (2015).
PricewaterhouseCoopers (2015).
Swiss Re (2015a).
Milliman (2015).
Holzmuller (2009).
See Chen et al. (2013) for a systematic overview of the previous factor-based solvency system in China.
IAIS (2011).
Cummins et al. (1995).
Cummins et al. (1994).
Doff (2008).
Feldblum (1996).
Merrill et al. (2012).
Bank of England (2014).
Segal (2013).
van Rossum (2005).
PricewaterhouseCoopers (2010).
Association of British Insurers (2015).
Nebel (2004).
CIRC (2014).
CIRC (2015c).
The website address is http://icid.iachina.cn.
Eling et al. (2007).
NAIC (2010).
EC (2009).
Swiss Federal Office of Private Insurance (2006).
E.g. The Financial Services Agency (FSA) in Japan introduced the Solvency Margin Standard in 1996; The Swiss Financial Market Supervisory Authority (FINMA) in Switzerland implemented the SST in 2006; The Office of the Superintendent of Financial Institutions (OSFI) in Canada revised its minimum continuing capital and surplus requirements in 2015; The European Union (EU) began implementation of Solvency II in 2016; The National Association of Insurance Commissioners (NAIC) in the United States is reviewing the Solvency Modernisation Initiative at the time of writing.
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Fung, D.W.H., Jou, D., Shao, A.J. et al. The China Risk-Oriented Solvency System: A Comparative Assessment with Other Risk-Based Supervisory Frameworks. Geneva Pap Risk Insur Issues Pract 43, 16–36 (2018). https://doi.org/10.1057/s41288-017-0046-3
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DOI: https://doi.org/10.1057/s41288-017-0046-3