China Widens Insurer Investment Scope to Aid Returns

China will allow insurers to invest in real estate and equities of unlisted companies and give them more freedom in stock-market investments, the China Insurance Regulatory Commission said.

Insurance companies can put as much as 10 percent of assets in real estate and no more than 5 percent in shares of closely-held companies, according to a statement on the regulator’s website today. Ceilings on infrastructure investments will be raised to 10 percent.

The government is widening the investment scope of China Life Insurance Co. and rivals, which held most assets in bonds and bank deposits, limiting returns. Volatility in the nation’s capital markets this year is putting “big” pressure on insurers’ investment yields and risk management, CIRC Chairman Wu Dingfu told regulator officials July 19.

“Insurers’ investment yield should get a boost as all the relaxed areas offer higher returns than government bonds,” said Nan Sheng, a Shanghai-based analyst at UOB Kayhian Investment Co. “The short-term effect may be limited because they can’t drastically change asset allocation and it will depend on market conditions.”

Stocks and equity funds can’t exceed 20 percent of the company’s total assets as of the end of the previous quarter, according to today’s statement. Insurers can invest no more than 20 percent of assets in unsecured corporate bonds and debt securities issued by non-financial companies.

Chinese insurers’ premiums income surged 33.6 percent in the first half to 800 billion yuan ($118 billion), putting pressure on companies’ asset allocation as the nation’s stock market has tumbled 20 percent this year in Shanghai. Insurers’ total investments rose 11.3 percent in the first half of the year to 4.2 trillion yuan, according to the regulator.

The new rules on investment of insurance funds are effective from Aug. 31, according to the statement.

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