To guard against the credit risk of offshore reinsurers, the CIRC recently issued the "Notice of the China Insurance Regulatory Commission on Matters Concerning the Provision of Security Measures by Offshore Reinsurers (Draft for Comments)" (hereinafter the "Notice"), regulating the provision of security measures by offshore reinsurers and promoting the sustained and healthy development of the reinsurance market.

An "offshore reinsurer" refers to a reinsurance recipient established outside China that assumes business from domestic insurance companies by way of reinsurance (including by way of retrocession), including insurance companies, reinsurance companies, captive insurers, mutual insurance organisations, reinsurance pools, Lloyd's and its syndicates, and other types of insurance institutions recognised by the CIRC.

The Notice sets out regulatory requirements on matters concerning the provision of security measures by offshore reinsurers, mainly in terms of the applicable targets and scope, the forms and scope of security, the specific requirements for security measures, and the use of security measures in solvency assessment. The Notice clearly states that domestic insurance companies may require offshore reinsurers to provide security measures for reinsurance receivables and reinsurance reserves recoverable. The recognised forms of security include cash deposits, standby letters of credit and other security measures recognised by the CIRC, and the coverage of the security measures is stipulated to be the domestic ceding companies' credit risk exposure to offshore reinsurers, namely reinsurance receivables and reinsurance reserves recoverable.