China: State Council Releases Insurers from Equity Investment Limits

Source: Regulation Asia Editors, Regulation Asia 2020-07-17

A State Council decision paves the way for the implementation of the CBIRC rules drafted in 2018 that would have removed most limits on the equity sectors in which insurers can invest.

China’s State Council has lifted limits on the industries in which insurance companies can make equity investments and laid plans to allow insurance funds to tap private equity and venture capital investments in pilot programmes, Caixin reports.

The decision, disclosed after a cabinet meeting chaired by Premier Li Keqiang, formalised long-awaited rule changes to expand insurers’ equity investment activities to provide additional long-term funding to the private sector.

To date, Chinese insurance companies have invested in the real economy mainly through debt investments with very limited equity investment due to regulatory restrictions.

Under current regulations, equity investments by insurance funds are limited to insurance companies, non-insurance financial companies and equity in companies with pension, health-care and auto services businesses that are related to the insurance sector.

In 2018, the CBIRC (China Banking and Insurance Regulatory Commission) issued draft rules to remove most limits on the equity sectors in which insurers can invest insurance funds, but the revisions were never finalised. The State Council decision paves the way for the implementation of the draft rules.

The rule changes could unleash trillions of yuan of insurance money into the economy as the government moves to fuel China’s rebound from the effects of Covid-19, Caixin says.

According to CBIRC data at the end of May, Chinese insurers had total assets of nearly CNY 22 trillion, including CNY 19.7 trillion in investments. Of this, CNY 6.8 trillion was in bonds, CNY 2.8 trillion in bank deposits and CNY 2.6 trillion in stocks and securities.

China’s State Council

insurer

China: State Council Releases Insurers from Equity Investment Limits

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