March 20, 2017

CIRC published new notice on provision of Standard Collateral/Guarantee

Publication of the Notice of the CIRC on Administration of the Provision of Standard Collateral/Guarantee by Offshore-to-China Reinsurance Companies

On 13 March 2017, the China Insurance Regulatory Commission (CIRC) published the Notice of the CIRC on Administration of the Provision of Standard Collateral/Guarantee by Offshore-to-China Reinsurance Companies (中国保监会关于离岸再保险人提供担保措施有关事项的通知) (Notice), with the aim of standardising the placement of collateral and guarantees by offshore-to-China reinsurers (Reinsurers).

The key points contained in the Notice are:

  • In order to manage Reinsurer credit risk exposure, cedant China insurers shall require the provision of collateral or guarantees by Reinsurers.
  • For the purpose of managing a Reinsurer's credit risk exposure, the following forms of collateral/guarantee are allowable for Reinsurers:
  1. Cash;
  2. Stand-by letters of credit (subject to certain and issuer restrictions); and
  3. other forms of collateral approved by CIRC.

In respect of stand-by letters of credit and confirmatory letters, these need to be delivered to China insurers within 30 (thirty) days upon their issuance, as well as before the deadline for the submission of such China insurers' quarterly solvency reports.