Opportunities and challenges for insurance asset management in an era of industry homogenization
Since 2012, China Insurance Regulatory Commission (CIRC) has consecutively released numerous new regulations, resulting in a broader than ever investable universe of assets available to insurers. The borderline between insurance company sponsored asset management company and other traditional asset management company are blurring. Competition for the entire asset management industry is heating up, and it appears that the industry is entering a new era of homogenization. This report was written based on the latest trend of development and industry experiences.
On October 27 2014, CIRC has released a new regulation "Guide to Insurance Assets Risk Classification". The development of this new guidance was based on experience of similar guidance employed by China Banking Regulatory Commission in the banking industry to management risk of financial assets held by banks. The objective of this new guidance is to improve oversight, efficiency, and quality of financial assets held by insurers. The scope of this guidance mainly covers long term alternative investments. The significances of this guidance are:
- Improve Competitiveness: Promote risk awareness on alternative investments, align risk management capability with business functions, and to improve overall competitiveness of insurance asset management companies.
- Unveil Quality of Assets: Improve disclosure on the quality of alternative assets held by insurance companies.
- Write Down Provision: Helps insurers to get a better sense and to be prepared on the amount of write down provision required.
- Bonus Points for Compliance: Insurance company whom have implemented this guidance and audited by independent 3rd party will earn 6 bonus points in yearly review from CIRC.