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CIRC Releases Rules on Risk Prevention
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The new risk prevention guidelines published by the China Insurance Regulatory Commission (CIRC) stress both practicability and creativity in requiring insurance and insurance asset management companies to establish risk prevention systems for their rapidly growing indemnity funds.

The guidelines follow reports earlier this year that the government has decided to allow insurance firms to trade stocks directly to bolster their repayment capacity.

Chinese insurers have been allowed to invest their growing premium incomes only in bank deposits, treasury bonds, policy bank bonds and some corporate bonds. Many believe this restrains their profitability and undermines their ability to settle claims.

Late last month, the CIRC published long-awaited regulations on insurance asset management companies, clarifying requirements for establishment and business scope.

But the regulations did not touch on whether or when the companies would be permitted to trade stocks directly, circumscribing their investment scope as treasury bonds, financial bonds--mainly those issued by policy banks--and "other channels authorized by the State Council."

China's two largest state-owned insurers, the People's Insurance Co. of China and China Life Insurance Co., established the nation's first insurance asset management firms last year as part of reform schemes that culminated in overseas initial public offerings.

(China Daily May 10, 2004)

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