OREANDA-NEWS. Fitch Ratings says in a new report that the more granular capital regime under the China Risk Oriented Solvency System (C-ROSS) is spurring Chinese life insurers to issue more equity-like hybrid securities, with China Life Insurance Company Limited having issued the first Core Tier II instruments under the new regime in June 2015.

The China Insurance Regulatory Commission promulgated the C-ROSS in May 2013, which introduced "core" and "supplementary" capital. Chinese insurers now calculate their solvency margins under the C-ROSS, but are supervised based on existing capital rules until the formal implementation of the C-ROSS. Subordinated debts remain primarily supplementary capital; the major life insurers' financial leverage remained at 19%-28% at end-2014.

The implementation of C-ROSS should prevent Chinese life insurers from unduly increasing equity exposures, which usually represent 10%-15% of their invested assets. The insurers are able to manage the impact of recent corrections in China's stock market on capitalisation because their solvency positions are stronger following the stock market rally since mid-2014. The Shanghai Composite Index at 7 July 2015 was about 15% higher than at end-2014 and 81% higher than at end-1H14.

"China Life Insurance Market Dashboard 1H15" is available at www.fitchratings.com or by clicking on the link in this media release.