China Banking and Insurance Regulatory Commission issues guidance on concentration risk management for insurance groups

The China Banking and Insurance Regulatory Commission released supervisory guidance on concentration risk for insurance groups, creating a unified framework to manage potentially large, concentrated exposures that can arise across complex group structures. The guidance is intended to consolidate previously dispersed requirements across insurance group supervision, solvency and the use of funds. The guidance sets out core management principles, requiring concentration risk to be managed on a consolidated basis and under “substance over form” and look-through approaches, and to follow prudence, matching, consistency and dynamic management principles. Insurance groups must establish end-to-end processes covering risk identification, measurement, monitoring and reporting, and build multi-dimensional indicators and limit systems, including mechanisms for back-testing and updating limits, early-warning triggers and management of limit breaches. It also requires annual public disclosure of concentration risk management information on the group’s official website, alongside regular compilation of concentration risk indicators and reporting on concentration risk conditions. The approach is positioned as primarily principles-based, with scope for further refinement of supervisory measures and tools as industry practice and supervision mature.