According to the regulations on solvency management of insurance companies (Draft) issued by the CIRC and the Central Bank of China on July 30 this year, an insurance company that meets the following three regulatory requirements is a solvency standard company: (1) the core solvency adequacy ratio is not less than 50%; (2) the comprehensive solvency adequacy ratio is not less than 100%; (3) the comprehensive risk rating is class B or above u3002 If it fails to meet any of the requirements, it shall be a company with substandard solvency. In addition, insurance companies whose core solvency adequacy ratio is lower than 60% or comprehensive solvency adequacy ratio is lower than 120% will be listed as key verification objects by supervision.
According to the data disclosed by regulators, as of the end of the third quarter of this year, the average comprehensive solvency adequacy ratio of 178 insurance companies was 242.5%, and the average core solvency adequacy ratio was 230.5%. The average comprehensive solvency adequacy ratios of life insurance companies, property insurance companies and reinsurance companies were 236.5%, 267.6% and 321.6%, respectively.
Generally speaking, the comprehensive and core solvency adequacy ratio of the insurance industry remained at a high level at the end of the third quarter, but there were significant differences among different insurance companies. For example, according to the above draft for comments, at the end of the third quarter, six insurance companies or companies were listed as substandard by the regulatory authorities. In addition, at the end of the third quarter, the comprehensive solvency adequacy ratio of more than 100 insurance companies declined compared with the end of the second quarter. Although the solvency of insurance enterprises is not the higher the better, ensuring adequate solvency can not only relieve the worries of insurance enterprises, but also provide the aftereffect for the development of insurance enterprises. Therefore, increasing capital or issuing bonds to supplement capital is an important guarantee for the long-term development of many insurance enterprises.
Intensive capital increase and bond issuance of insurance enterprises
Based on the consideration of regulatory requirements such as solvency and the actual needs of business development, insurance companies have increased capital intensively and issued bonds to supplement capital since this year.
According to the incomplete statistics of the information on capital increase and bond issuance of insurance enterprises disclosed on the official website of the CIRC and China bond information network, the reporter of Securities Daily found that as of November 29, more than 30 insurance enterprises had issued bonds and increased capital intensively in the year. Among them, life insurance companies include Ping An Life Insurance, ABC life insurance, China Post life insurance, China United life insurance, Minsheng life insurance, Zhujiang life insurance, Xinhua Life Insurance and CCB life insurance; property insurance companies include modern property insurance, Guoren property insurance, China Coal insurance, Rongsheng property insurance, lipao insurance, Guoshou property insurance, etc.
Among the insurance enterprises issuing bonds this year, some of them have obtained the approval of the regulatory authorities as early as 2019 or earlier, and have not issued bonds until this year; some insurance enterprises have newly obtained the bond issuance quota this year. Specifically, as of November 29, the bond issuance applications of Guohua life insurance, Guoshou property insurance, China property insurance reinsurance, China Merchants Renhe, Yingda Taihe life, Jixiang life, Hengqin life, BOC Samsung Life Insurance have been approved by the CIRC.
Increasing capital and issuing bonds are the two most common methods to improve the solvency adequacy ratio of insurance enterprises, but there are great differences between them. Capital increase is a kind of capital injection for insurance enterprises by shareholders. The regulatory authorities focus on the qualification of shareholders and the source of funds. The main body of issuing bonds is insurance enterprises. Whether the bonds can be issued smoothly mainly depends on the inspection results of supervision departments on their own strength and development.
From the different attitudes of insurance companies towards capital increase and bond issuance, insurance companies prefer to issue bonds this year, and the amount of bonds issued in the year is also higher than that of capital increase. A person in charge of a medium-sized life insurance company told the Securities Daily that the difficulty of issuing bonds by insurance companies is usually less than that of increasing capital. Capital increase needs to coordinate the wishes of all shareholders. For example, some shareholders want to increase capital, but after the increase, the proportion of shareholders equity may exceed the limit of relevant regulations; for example, some shareholders have the willingness to increase capital but have no capital increase strength, which will cause some insurance companies to delay capital increase and affect the business development of insurance enterprises.
Take China France life insurance as an example. From its establishment in 2005 to the end of the third quarter of this year, the capital of China France life insurance has never been replenished for various reasons. Due to continuous losses, the companys capital has been exhausted, and the cash flow has continued to flow out; due to insufficient solvency, China France life insurance has experienced staff loss, recruitment difficulties, and insufficient staffing for key positions, and the business income in the third quarter was 0. Recently, China France life announced that it intends to increase its capital by 2.8 billion yuan and introduce three new shareholders such as Ningde Shidai. If the capital increase plan is approved, the problem of insufficient capital that has plagued it for more than ten years is expected to be completely solved.
Compared with capital increase, insurance companies can generally achieve the goal because of the relatively low threshold of issuing bonds.