The more granular capital regime under the China Risk Oriented Solvency System (C-ROSS) is spurring Chinese life insurers to issue more equity-like hybrid securities, according to Fitch Ratings.

Fitch Ratings cited China Life Insurance Company as having issued the first core tier II instruments under the new regime in June 2015.

The ratings agency explained that the China Insurance Regulatory Commission promulgated the C-ROSS in May 2013, which introduced core and supplementary capital. Chinese insurers now calculate their solvency margins under the C-ROSS, but are supervised based on existing capital rules until the formal implementation of the C-ROSS.

According to Fitch Ratings, the implementation of C-ROSS should prevent Chinese life insurers from unduly increasing equity exposures, which usually represent 10%-15% of their invested assets.

It said the insurers are able to manage the impact of recent corrections in China’s stock market on capitalisation because their solvency positions are stronger following the stock market rally since mid-2014.

The Shanghai Composite Index at 7 July 2015 was about 15% higher than at end-2014 and 81% higher than at end-1H14, said Fitch Ratings.