b'INSURANCE REGULATORY A SIAChinaCBIRCs New Solvency Regulatory Rules II for Insurance CompaniesThe new capital rules, China Risk Oriented Solvency System (C-Ross), issued by the China Banking and Insurance Regulatory Commission (CBIRC) on December 30, 2021, are likely to have an impact on premium growth rates in 2022 as the market is still grappling with the COVID-19 pandemic. In particular, C-Ross is likely to affect the credit and surety insurance market, which has experienced significant growth in its P&C business over the past few years.Under Phase 2 of C-Ross, the capital requirement in the market will be calculated based on several factors such as the net outstanding guarantee exposure. Furthermore, there will be harsher risk charges determined by the type of loans guaranteed, loan concentration risk, loss ratio history and the growth of guarantee insurance premiums compared to the industry average. Compared to the existing regime, this is a more granular risk capital calculation. The higher capital requirement may relax the growth of the credit and surety market or may lead to the refinement of pricing and insurance product design. The new rules are set to encourage insurers to tighten their risk selection and to increase pricing adequacy to help improve profitability.The insurance industry will begin to implement the new rules from the first quarter of 2022, anticipating full implementation by 2025 at the latest. The CBIRC will also set transitional policies for insurance companies that are significantly affected by the new rules, allowing the new rules be implemented into practice gradually. Insurers who are anticipating a potential decrease in solvency ratios have been actively replenishing capital through direct capital injections or supplemental bond issuance. It is foreseeable that insurers solvency performance will diverge after the implementation of Phase 2 of C-Ross, with minimal impact on non-life insurers because of stable investment yields as well as low cost structures.108|Global Insurance Industry Year in Review 2021'