China allows insurers wider investment channels
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E-mail CNTV, January 9, 2014
China's Insurance Regulatory Commission, or CIRC, announced Wednesday it will allow insurance companies to invest their historical inventory insurance polices in blue-chip stocks. Chinese insurers have also been given the green light to invest in the country's Growth Enterprise Board, a NASDAQ-like market for startups known as the GEM board or ChiNext board.
The move is expected to help insurers diversify their revenue streams and potentially bring more stability to the market. Cheered up by the news, the Chinext index closed nearly 4 percent higher today.
According to the statement published by the CIRC on its official micro-blog, the State Council has approved insurance companies to invest their historical inventory insurance policies in blue-chips. The CIRC will issue detailed regulations such as the investment proportion and the qualification of blue-chips in the near future. These insurance policies include long-term life insurance products sold by insurers before 1999 under a circumstance of high interest rate.
"The move could solve many problems in the insurance industry, it will help reduce losses caused by interest rate gap. The approval could definetely boost the captial market, we are quite optimistic," Han Xiangrong, Deputy Director of Capital Regulation Department of CIRC, says.
The announcement comes just one day after the CIRC allowing insurers to invest in the ChiNext board, which lists high-tech, small-cap firms, featuring high growth but also high risks. Currently insurers can invest up to 10 percent of their assets in the stock market, this is the first time that insurance companies are given the go ahead to invest in high growth stocks.
"The ChiNext board collects emerging industries, I believe that allowing insruance companies to invest in the board could help diversify capital choices and improve the asset allocation structure," Han says.
According to the notice published by the insurance regulator, insurers should report to the China Insurance Regulatory Commission if their holdings reach or exceed 5 percent of their investment assets. Under the rules, insurance companies can either invest directly or through asset management companies. However, they can not invest in firms under investigation by regulators or those that have been punished or censured by regulators within one year. They must also avoid companies whose financial statements have failed to win the endorsement of auditors within the past year or firms that are suspected of manipulation.
The approval comes after 27 firms were given the nod for their IPOs recently after a 13-month freeze in the market. The majority of these firms will land on the ChiNext and the small and medium-sized board.
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