— An Exclusive Interview with Mr. Ren Jianguo, General Manager of CISFC
At the just-concluded 2013 National Conference on Insurance Regulation, relevant leader from CIRC, stressed the complex and severe situation to be faced by the insurance sector this year, and reminded the regulators of employing the bottom-line thinking.
The Report first clearly comes up with the requirements of strengthening professional management of CISF from the perspective of the entire industry. “As an industry operating and managing risks, how can it manage its own risks? And how can it hold the risk bottom line?” For these questions, Mr. Ren Jianguo, General Manager of CISFC, voiced his opinions when accepting the exclusive interview of our journalist.
China Insurance Security Fund Co., Ltd. ("CISFC" for short) was incorporated in September 2008. It has recently disclosed that CISF had reached the balance of RMB38.2 billion with an annualized yield rate of 5% by the end of 2012.
Over the past years, CISFC made conspicuous and outstanding achievements in the risk resolution of New China Life Insurance Co., Ltd. and China Insurance . Therefore, it helped New China Life Insurance improve its corporate governance, creating a solid foundation for its listing at A-share market and realizing CISF’s successful exit from the target company with premium. Besides, CISFC implemented the custody policy and restructured China Insurance by injecting the capital of RMB6 billion, and successfully brought in strategic investors, solving its solvency problem existing for many years.
Mr. Ren Jianguo, the Former Director-General of the Shandong Bureau of CIRC, started acting as the new General Manager of CISFC in October 2012. Recently, he shared his thoughts on positioning and future development blueprint of CISFC with the journalist in his bright but not very roomy office at the Financial Street, while holding a "business plan" in his hand.
He said that the insurance security fund system was a significant policy arrangement that tallied with not only the actual conditions of China but also the international practice, and that strengthened the risk management of the insurance industry. It was also an important tool and mechanism of insurance regulation and a significant shield to prevent and dissolve the industry risk. CISFC should be an enterprise providing public services and implementing market-oriented operation, and also one of the economic means with which the regulatory authorities prevent and resolve the industry risk. Therefore, CISFC must persist in its development direction of serving insurance regulators, serving healthy development of the insurance industry and serving insurance consumers, with the ultimate objective of safeguarding legitimate rights and interest of insurance consumers.
Making the CISF management platform better
Since its establishment, CISFC has kept refining the collection flow of CISF, timely collected the fund in full amount and gradually optimized the asset structure, thereby achieving a good return on investment of CISF.
Mr. Ren Jianguo stated that, the Company would, as instructed by relevant leader from CIRC that "more efforts should be devoted to reinforcing the professional management of CISF", make the management platform of CISF better and make itself become the stabilizer and booster for healthy development of the insurance industry, so as to provide solider material foundation of bailing out the policy holders, policy transferee companies and resolving the insurance risks and to serve stable development of the insurance industry. On one side, CISFC is now studying the information-based management of fund collection, and cooperating with the regulators to formulate the operating procedures and implementation rules for fund collection with the aim of enhancing the collection and service level of CISF.
Mr. Ren introduced that a property insurance company may stop withdrawing the insurance security fund when it reaches 6% of the total assets of such company, and this figure was 1% for a life insurance company in accordance with the Measures for Administration of the Insurance Security Fund (“the Measures”). At present, CISF charges the fund amount at different rates according to the types of insurance, irrespective of the risk profile of insurance companies. CISFC will carry out the differential fee rates gradually in the future, and charge more fund amount from insurers with inferior management but high risk, so as to better demonstrate the principle of "equitable burden-sharing" and enhance the management level of the industry.
On the other side, to guarantee the security, liquidity and profitability, CISF can be only invested in bank deposits and government bonds in the past. The new Measure released in 2008 specified that CISF could be additionally invested in central bank bills, bonds issued by state-owned enterprises and financial bonds issued by state-owned financial institutions. Nevertheless, these bonds issuers should have a higher credit rating and restricted scope of investment so as to guarantee the security of CISF. At present, the majority of CISF is invested in the medium- and long-term bank deposits, and the proportion that is invested through the entrustment is relatively low. CISFC is now striving to obtain the regulatory support to expand the investment channels of CISF, so as to enable CISF to employ different investment portfolios at different stages of an economic cycle, also increase our operating profit and market participation with the help of professional investment institutions.
Making the risk monitoring platform stronger
At the National Conference on Insurance Regulation, relevant leader from CIRC defined “firmly holding the bottom line of preventing the systematic and regional risk” as a top priority among those six tasks in 2013.
"To prevent and mitigate the industry risks, we should first study in depth the causes of and relations between risks, know well about the actual situation and work out an overall plan” said Mr. Ren, “CISFC would build up the risk monitoring platform as the next step to achieve its goal as the identifier and alarm of the industry risks”.
Specifically, CISFC will establish a scientific and objective risk monitoring and warning indicator system with strong credibility and characteristics of CISFC, and make best use of the advanced and applicable monitoring technologies and means by further detailing and regulating the risk assessment of the insurance industry. Meanwhile, the Company will prepare and publish the industry prosperity index and the confidence index of insurance consumers, and perform the risk rating of insurance companies at an opportune moment, so as to provide bases for the determination of differential fee rates. In addition, under the support of regulatory authorities, the Company will try to conduct the pertinent risk investigation based on sound monitoring and analysis of offsite data, so as to alarm risks in a timely manner. CISFC will also conduct and fulfill the said tasks step by step, give support to the risk resolution and furnish the parties concerned with decision-making reference through continuous monitoring, assessment and warning of the industry risks, exerting its due functions as a risk monitoring platform.
Moving the gateway of risk resolution forward
Mr. Ren Jianguo revealed that CISFC participated in special research of exit mechanism of the insurance market that was initiated by CIRC in 2012. The Company will continue to participate in the development and improvement of the exit mechanism in 2013 to make it commensurate with actual conditions of China, make flexible use of administrative remedy and financial remedy to reduce the cost of risk resolution. Meanwhile, CISFC will take the peers’ experience for reference to specify the responsibilities of CISFC as a receiver, liquidator, bankrupt manager and the like.
CISFC will explore the way to move the gateway of risk resolution forward and make itself become the pacemaker and fire extinguisher of risky companies, and conduct due diligence on companies with material hazards as early as possible, size up their risk situations and bring forward suggestions for risk resolution to avoid passive remedy. To this end, Mr. Ren used a vivid metaphor, "It is like using money to buy medicine instead of coffin, and it is simply the right medicine. In this way, the money that is intended to be used to buy the coffin is saved, furthermore, the person recovered from illness could pay back the money."
Generally, methods to remedy the risky companies include administrative remedy and financial remedy. CISFC hopes to use the administrative remedy more in the future to reinforce the internal control of insurance companies. For example, under the management of CISFC, China Insurance derived the before-tax profit of RMB2.7 billion in 2012, thereby effectively mitigating the risks.
Developing and expanding the service functions
Mr. Ren Jianguo told our journalist that the policy registration had been included in the overall framework of information sharing platform plan of the insurance industry. For the hundreds of millions of policies, CISFC will gradually sort out and incorporate them into the unified management by pushing ahead with the establishment of policy registration system. Implementing this system is conducive to the enhancement of the information-based management level of the insurance industry, to the reinforcement of the monitoring over the industry risk and to the formulation of the policy remedy plan in an accurate and reasonable manner.
In addition, CISFC has started performing the registration of debt investment plan to cooperate in the reform of debt investment product issuance system, which renders quality services to the market and conduces to the risk monitoring over and analysis of investment products in the future. "Up to date, the Company has issued the registration notice of several products, and the system reform is being moved on smoothly." Mr. Ren said.
Furthermore, CISFC plans to cooperate with CIRC in strengthening the services of risk education to consumers by drawing the experience of China Securities Investor Protection Fund Corporation Limited, so as to protect the consumer interest well. (China Insurance News)