In March 2012, China Insurance Regulatory Commission (“CIRC”) launched a three-year project to research and develop a more robust China risk oriented solvency system (“C-ROSS”) in March. CIRC organized 13 task forces to research the solvency framework, capital modeling, and various risk types for both life and P&C insurance exposure. The speakers for today’s panel include officers from the CIRC, and leaders of various C-ROSS task forces, including the “P&C Underwriting Risk Project” and the “Other Risks and Risk Correlation Project”.

Presentation 1: Introduction of C-ROSS

1. The main characteristics and shortcomings of the current solvency system in China

2. The objective of C-ROSS

3. The structure of C-ROSS and its main characteristics

4. The difficulties in building C-ROSS and the timetable for finishing C-ROSS

5. C-ROSS and the international common standard in solvency system

Presentation 2:

Solvency II inherits its framework from Basel II of EU Banking Industry.  One big difference between banking and insurance, from the actuarial point of view, is that the risk distribution of the banking industry is relatively asymmetric, while the distribution of the insurance industry is generally right-skewed, especially for the catastrophe risks. For cat risks, this kind of feature defies good solutions under a correlation matrix framework.  The correlation matrix approach creates inconsistencies between theoretical results and cat model results.  To solve the issue, a new approach, which is to minimize the weighted-MSE instead of relying on a presumed distributions, is discussed.  This new correlation framework is planned for use in the China Risk Oriented Solvency System (C-ROSS) for calibrating cat risks.  We hope colleagues from the actuarial field worldwide can provide feedbacks to this new approach before China Risk Oriented Solvency System (C-ROSS) is formally rolling out in 2015.

Presentation 3:

As an emerging market country, China's insurance industry reflects the classic characteristics of rapid development and big change.  The current measurements of underwriting risk of a property and casualty insurance company in China Risk Oriented Solvency System (C-ROSS) are designed to meet Chinese realistic conditions. The measurements are divided into four main parts, including calculation structure, stochastic method, risk factor model and aggregation method. A new hierarchical reduction model is used as a core measurement, with effective solution to scale impact and systemic risk.