The insurance regulator will soon launch updated rules on insurers' overseas investments, as part of efforts to boost insurers' investment returns and spread risks.

"We are now working on the detailed rules and plan to make them public very soon," said Yuan Li, spokesman of the China Insurance Regulatory Commission (CIRC), yesterday.

The State Council, or China's Cabinet, approved insurance companies' plan to invest their own foreign reserves overseas in 2004 and allowed them to buy foreign reserves for overseas investments in 2006.

According to a source at an insurance asset management company, insurance capital could be allowed to be invested in blue chips on overseas main boards.

But only those meeting the following requirements will be allowed to invest overseas: a minimum of 120 percent solvency ability by the end of last year; the company must have an independent asset management department; it must have at least two professionals with experience in overseas investment; and investments will be put in the custody of a third party.

Investments going to fixed-return products or equities launched by the same institution shall be less than 5 percent of the company's overseas investment ceiling and that for money market products is 10 percent.

The investable products, the source said, include bank deposits, commercial bills, bonds, monetary fund and stocks.

"Larger access to overseas markets will help Chinese insurers spread risks and improve investment returns," said Hao Yansu, an insurance professor with the Central University of Finance and Economics.

Such rules will have even more appeal for insurers now as the central bank has raised its benchmark lending and deposit rates by 27 percentage points and reduced the interest tax from 20 percent to 5 percent.

Higher rates draw demand away from fixed-income and savings-substitute products offered by insurers, said Yuan Li.

"It's especially important for Chinese insurers to boost their investment returns after the government has raised the interest rates."

Chinese insurance firms had invested 19.7 billion yuan overseas as of the end of June, equal to about 0.7 percent of their total assets.

(China Daily July 25 2007)