Insurance News
- More investment options for insurers
Date: 7-Mar-2007 Sources: (Shenzhen Daily)
THE government plans to relax curbs on insurers' investment options in the near future, opening the door for them to funnel client assets overseas and plough more money into domestic stocks, regulatory and industry sources said.
Domestic insurers could win approval as early as next quarter to invest as much as 15 percent of their assets abroad, a regulatory source said.
In the coming weeks, the regulator might allow insurers to double, to 10 percent, the proportion of assets they may hold in domestic equities, an industry source said.
Given that domestic insurers' assets totaled 1.97 trillion yuan (US$255 billion) at the end of 2006, the moves could potentially release up to 100 billion yuan into domestic equities and 300 billion yuan into overseas markets.
Last April, the central bank unveiled the framework of a Qualified Domestic Institutional Investor (QDII) program to encourage capital outflows, partly to ease upward pressure on the yuan.
But the insurance industry is still awaiting detailed rules.
In December, the China Insurance Regulatory Commission (CIRC) invited comments on draft regulations proposing that insurers be allowed to invest in overseas stocks, stock options and equity funds, as well as in money and fixed-income markets.
'A lot of insurance companies have applied to invest abroad and many of them have got approval in principle,'the regulatory source said.
'The actual program should be in place in the second quarter,'he said, adding that the State Administration of Foreign Exchange, the currency regulator, which must approve capital outflows, had reached an agreement with the CIRC on the issue.
With very limited exceptions, insurers are not permitted to invest clients' assets abroad, although they have been allowed since 2004 to invest offshore the proceeds of overseas initial public offerings.
Domestically, large insurers may invest no more than 5 percent of their assets in equities, but the regulatory source said preparations to double that limit had been completed.
'The only thing to be decided is the right time to give the go-ahead. It could be very soon,'he said.
Some other restrictions, such as a ban on insurers buying shares that have risen more than 100 percent in the previous year, might also be relaxed, according to the industry source.
Furthermore, small and medium-sized insurers will be allowed to start investing in stocks by appointing trustees, he added.
The regulatory official said the short-term priority in letting insurers invest overseas was not to make money.
'The more important thing is for the insurers to go abroad, understand the global market and get expertise,'the source said.
Analysts said domestic insurers would be well advised to exercise caution at the outset by mainly buying blue-chip shares in Hong Kong.
'Another ideal choice would be to cooperate with a foreign partner,'said Liu Yingying, an insurance analyst at China Securities in Beijing.
The initiatives are part of a drive by the CIRC to broaden the investment channels open to insurers, which have most of their assets in bank deposits and bonds.
Last year, the commission gave insurers the right to buy shares in banks, brokerages and other financial institutions and to take stakes in infrastructure projects such as railways.
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