China insurance reg cap first explained

Author: Ashley Lee | Published: 15 Jul 2015

China Life has sold the first bonds under the China Risk Oriented Solvency System (C-ROSS), the country’s version of Solvency II. Its structure could set a precedent for PRC hybrid instruments.

The China Insurance Regulatory Commission (CIRC) announced C-ROSS rules in February, but there is a transition period until they are implemented in 2016. The China Life core tier 2 bonds, which priced on June 25, were the first to test these regulations, while also complying with the old regime.

Despite the fact that this was a market first, China Life sold $1.28 billion in bonds priced at 4%. The bonds, rated A3(hyb) by Moody’s and A- by Fitch, were structured as 60-year non-call five bonds with an automatic rollover at the end of the first 60 years.

"This is a new regulatory regime with a new set of regulatory capital requirements – core capital and supplemental...