China’s insurer’s financing needs skyrocket to $29.7b: Report

Stricter solvency rules imposed in 2021 led to a decline in solvency indicators under the new regulations.

Chinese insurance companies faced an increased need for financing in 2023 to comply with stricter solvency rules, resulting in a significant surge of approximately 290% in funds raised compared to the previous year, YiCai Global reported.

According to data from the National Administration of Financial Regulation (NAFR), insurers raised $29.7b, up from $7.6b in the previous year.

Authorities approved 44 bond and share sales by insurers, generating $24b through 21 bond sales and $20b through share issues.

Notably, some companies, such as China Pacific Property Insurance, utilised both avenues to strengthen their capital base. China Pacific Property Insurance raised $1.41 through bond sales and increased its share capital by $67.1m.

The stricter solvency rules, introduced by the NAFR at the end of 2021, led to a decline in solvency indicators under the new regulations.

As of 30 September, the average core solvency adequacy ratio for insurance companies was 126%, and the comprehensive solvency adequacy ratio was 194%, down from 220% and 232%, respectively, at the end of 2021.

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These ratios represent the share of an insurer's capital to the minimum capital required by regulators, with the core ratio mandated to be no lower than 60% and the comprehensive ratio required to be at least 120%, according to regulations. As the three-year transitional period for the new rules concludes next year, it is anticipated that many insurers will continue issuing bonds to alleviate capital pressures, as noted by Guotai Junan Securities.