S&P warns Chinese insurers of equity risks

July 14 2015 by InsuranceAsia News Staff

Chinese insurers will be exposed to higher market risk if they raise their allocation towards equity investments following China’s relaxation of regulatory limits on equity investments, Standard & Poor’s said in a media release.

With this and the enhanced risk controls on equity investments required by the China Insurance Regulatory Commission, S&P said that Chinese insurers are unlikely to change their asset allocations significantly.

Concerns that China’s insurance firms will significantly invest in equity were triggered by the government’s decision to loosen its restriction on the amount that insurance companies can invest in stocks.

S&P credit analyst Eunice Tan said the impact on the credit profiles of the firm’s rated Chinese insurance companies remains manageable due to their adequate enterprise risk management and market risk control.

Tan, however, stressed that raising their allocation towards equity investments would pressure the financial risk profiles of Chinese insurers.

Standard & Poor’s says, though, that Chinese insurers will remain prudent in their equity investments, especially following the C-ROSS implementation (see S&P’s video on C-ROSS here).

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