The China Insurance Regulatory Commission (CIRC) yesterday issued two additional sets of guidelines for insurance companies' investment activities in the domestic stock market.

The move "completed the regulatory and operational framework" for insurers trading of shares, the commission said in a statement.

On Tuesday, it published the first set of guidelines on the general matters. The two made public yesterday were on practical details in risk control and custody of the underwriters' stock investment assets.

To encourage a diversified approach to investing, the guidelines stipulated that an insurance company's investment in a single listed company should not exceed 5 percent of the insurer's assets available for stock investment.

Insurance companies are required to report to the commission drastic fluctuations of their stock investment value. Specifically, insurers should report when their losses in stocks decline by 10 percent or more of the cost they made to buy the stocks, or, when their gains exceed 20 percent of the cost.

Insurance companies are also prevented from controlling too many shares in one single company. The guidelines say that an insurance company is not allowed to control 5 percent of tradable capital stock of a single listed company.

Financial authorities gave the green light to insurance companies' investing in the stock market at a time when they are obtaining huge premiums but also facing obligations to their customers expected to peak in years ahead.

The step will also benefit the stock market, which has been on the decline in the past three years and hovered around six-year lows early this month.

(China Daily February 18, 2005)