Insurers achieve adequate solvency ratios in Q2

China’s insurance companies posted adequate solvency ratios in the second quarter, with over three-fifths seeing a drop in the ratio quarter over quarter, the latest industry data show.So far, 155 insurance underwriters have disclosed their solvency reports for the second quarter on the website of the Insurance Association of China.For life insurers meeting regulation standards, the average comprehensive solvency ratio stood at 240.9 percent, while the number was 393.75 percent for property and casualty insurance companies, both well above the required 100 percent, the association’s data showed.The solvency of an insurer refers to its ability to pay claims and the solvency ratio is a key metric to measure its ability to meet its long-term obligations.Sino-French Life Insurance Co Ltd, Shin Kong-HNA Life Insurance Co Ltd and Jixiang Life Insurance Co Ltd failed to meet requirements from April to June amid an insufficient comprehensive solvency adequacy ratio, the same as the last quarter, the data indicate.None of the property and casualty insurance players went insolvent during the reporting period.More than 60 percent of insurance companies saw a quarter-on-quarter drop in their comprehensive solvency adequacy ratio. Industry watchers attributed the loss to business transformation under stringent supervision.To better protect policy-holders’ interests, China strengthened rules in the insurance sector, which pushed industry players to return to offering more long-term and guarantee-oriented plans.As such, many life insurers have had to retreat from selling short-term and risky policies which were once touted more as investment products than protection products, thereby generating smaller cash inflows as sales of products with more protection function could not fill the gap quickly, said a China Insurance News’ report.For non-life insurers who posted declining solvency ratios, industry insiders said that this was mainly because of their high operation costs due to small market size as well as the unfavorable situation resulting from the deregulation of commercial automobile insurance.

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