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Economic globalization is an inevitable trend for the development of the world economy, with different economies integrated with each other. At the background of Against the backdrop of globalization, the development of C-ROSS should follows international development trends, reflectsembody the features of emerging markets, and finally forms an internationally comparative solvency regulatory system, so as to reduce the costs of cross-border capital flows, boost the appeal attractiveness of China's insurance market to international capital, and help ChineseChina’s insurance companies allocate assets to the world market, and participate inemphasis insurance companies’ risk management around the world, and better facilitate the domestic insurers integratinge into the global insurance market.

C-ROSS follows observes the generally accepted risk-oriented principle, and adopts the widely-used "three-pillar" framework. The first pillarPillar I is quantitative regulatory requirements, mainly involving focusing on quantifying the capital requirements which measureof three types of quantifiable risks, including: insurance, market and credit risks; Pillar IIthe second pillar is qualitative regulatory requirements which serve to appraise appraise unquantifiable risks and risk management capabilities, conduct qualitative regulatory assessment of operational risk, strategic risk, reputational risk and liquidity risk through comprehensive risk rating systems, and assess the risk governance and management capabilities of insurance companies by means of risk management requirements and assessments; the third pPillar III is market self-discipline mechanism, which serves to further prevent the risks that are difficult to be staved off by conventional regulatory tools. C-ROSS, so to speak, has not only realized international comparability in terms of regulatory framework and technical standards on the basis of displaying reflecting the features of emerging markets; more importantly, it is an open, flexible and all-encompassing regulatory system.

The content of the "three pillars" of C-ROSS has fully reflected considered the reality characteristics of China's insurance market in terms of content, as well as the features of emerging markets, which are summarized below:

First, while measuring risks with advanced stochastic methods, the first pillar also takes into account the reality of the ChineseChina’s market insurer’s capacity and stresses and pay attention to simplicity and operabilitypracticality. After collecting the actual data about of the ChineseChina’s market, C-ROSS has developed employed a series of digital mathematical models to describemeasure insurance risk, market risk and credit risk with stochastic methods, organized several rounds of industry-wide quantitative tests, and calibrated various model parameters. It has adopted the standardized factor based approach of the industry to formulate calculate the minimum capital regulatory rules across the industry, and laid down the risk factors of all risk exposures based on the calculation results of the stochastic model. The situational scenario based method is adopted where it is really impossibleis impossible to apply the factor based method, like the minimum capital requirements for insurance risk and interest rate risk of life insurance companies.

The factor based method employed in the first pillar is not a simple factor method, but comprehensive factor method, which method, which is a combination of elementary risk factors and specific risk factor. The elementary risk factors is set to measure the industry uniformed minimum capital whilst the specific risk factor adjusts the elementary risk factor according to the specified businesses or assets. means: based on the elementary risk factors, certain different feature coefficients are set according to the varied risk features of specific business or assets. The elementary risk factors and feature factors jointly constitute comprehensive risk factors, based on which iInsurance companies calculate their respective minimum capital requirements using the comprehensive factor method , allowto ing regulatory standards to achieve better equilibrium between scientificity and operabilitypracticality.

Second, it has intensified enhanced the connectionrelevancy between the first pillar I and the second pillar II to fully reflect the risk profile and risk management capabilities of insurance companies. The minimum capital required under C-ROSS into the calculate solvency adequacy ratio calculations not only includes the minimum capital for the three quantifiable risks of the firstunder pillar I, and the control risk capital fromabout risk management capabilities of insurance companies, but also the counter-cyclical supplementary capital and additional capital for systematically the systemically important institutionsinsurers. The results of the Solvency Aligned Risk Management Requirements and Assessment (SARMRA) of Pthe second pillar II determine the minimum capital for the risk control risk, that is to say, increasingraising capital requirements for insurance companies with poor risk management capabilities and lowering decreasing capital requirements for those with strong risk management capabilities so that solvency regulation and the internal risk management of insurance companies can be combined to give insurance companies economic incentives to consistently boost their risk management capabilities.

Meanwhile, the Integrated Risk Rating of the second pPillar II combines the qualitative assessment results of operational risk, strategic risk, reputational risk and liquidity risk with the quantitative calculation results of insurance risk, market risk and credit risk of the first pPillar I so as to fully reflect the overall risk profile of insurance companies, and gives a regulatory rating for each of them on a quarterly basis (in A, B, C and D four categories, which apply to different regulatory policies and measures).

Third, the market discipline mechanism of the third pPillar III not only involves information disclosure requirements for insurance companies, but also places more emphasis on the establishment and cultivation of the market self-displine mechanism. Unsound market discipline mechanisms and weak market discipline are the common problems with emerging countries and regions including China. However, besides raising information disclosure requirements for insurance companies, C-ROSS is more dedicated to the issue of how to build a more effective market self-discipline mechanism, and has come up with specific measures, including proactive information disclosure by regulatory authorities, regular information exchanges and communication between relevant stakeholders, guiding relevant stakeholders to exert the role of supervision and constraint over the solvency risk of insurance companies.

Fourth, C-ROSS has reinforced and improved the regulation on insurance groups. In the wake of the 2008 financial crisis, all countries over the world have stepped uptightened regulation of insurance groups. Such Insurance groups have also achieved significant development in China in recent years. C-ROSS has included all types of insurance groups into its scope of solvency regulation, including insurance holding groups and hybrid insurance groups. Such solvency regulation not only involves all the elements of the three pillars including quantitative capital requirements, qualitative regulatory requirements and the market discipline mechanism, but also raises designed new regulatory requirements for the categories of non-transparency risk, concentration risk, and non-insurance risk which arebased on the specific characteristics of the organizational structure of insurance groups.

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