China's Insurance Regulatory Commission Works on Implementing Rules for Insurance Funds Investment in Infrastructure Construction

Strategic Insights -

The China Insurance Regulatory Commission (CIRC) is working on two sets of implementing rules concerning credit and equity investment schemes for the investment of insurance funds in infrastructure construction. The new rules aim to enhance governance of insurance funds and transparency in information disclosure. According to Sun Jianyong, director of the fund operating office in CIRC, the draft for credit investment scheme has been drafted, which includes forming a registration system and realizing asset separation through compulsory custody. The new rules will also enable credit schemes to circulate on the market through certificating them.

Key Takeaways:

  • The CIRC is working on two sets of implementing rules for credit and equity investment schemes for insurance funds in infrastructure construction.
  • The draft for credit investment scheme has been drafted and includes improvements such as forming a registration system and realizing asset separation through compulsory custody.
  • The new rules will enable credit schemes to circulate on the market through certificating them.
  • Insurance funds are allowed to invest in transportation, telecommunications, energy, municipal works, and environmental protection sectors.
  • The scale of newly increased insurance premiums in China is expected to hit 600 billion yuan by the end of the year, with 200 billion yuan of it for investment purposes.
  • Insurers are advised to invest in sectors such as infrastructure construction, making insurance funds internationalized, and doing equity investment as good ways to reduce interest rate sensitivity.
  • Insurers have invested 40.2 billion yuan in stocks in the first half of the year, rocketing 186% from the beginning of 2006.
  • Stock investment accounted for 3.5% of insurers' total investment by August.
  • Insurers are allowed to pour 5% of their total assets at the end of the previous year into the stock market.
  • The CIRC has denied market hearsay that it will increase the investment quota for insurers on the stock market.
  • Insurance funds invested 60.4 billion yuan in real estate in the first half of the year.

Statistics:

  • The scale of newly increased insurance premiums in China is expected to hit 600 billion yuan by the end of the year.
  • 200 billion yuan of the newly increased insurance premiums is for investment purposes.
  • Insurance funds invested 40.2 billion yuan in stocks in the first half of the year, rocketing 186% from the beginning of 2006.
  • Stock investment accounted for 3.5% of insurers' total investment by August.
  • Insurance funds invested 60.4 billion yuan in real estate in the first half of the year.
  • The overall investment of insurance funds in China is expected to increase.

Sources:

  • Asia Pulse, September 26, 2007
  • XIC (no date provided)