CIRC is likely to announce a new set of rules permitting Chinese insurance companies to expand their investment scopes soon.
According to news reports, CIRC recently held a two-day meeting with insurers on draft rules regarding expansion of the investment scope of insurance funds. At the meeting, CIRC indicated that it will permit insurers to trade in financial derivatives domestically and overseas, but that trading will most likely be limited to stock indices and bond futures for hedging purposes only. CIRC may also raise insurers’ investment ceilings for private equity investments. Under current rules, an insurance company, subject to certain qualification requirements, can invest up to 5% of its total assets in direct equity investments in unlisted companies in certain industries and up to 4% of its total assets in PE funds. It is possible that CIRC will increase insurer’s investment caps to 10% and 8% of total assets for direct equity investment in unlisted companies and PE funds, respectively. In addition, investments will be permitted in leading companies in the agriculture, energy and natural resources industries. Large well run Chinese insurance companies have developed significant experience in managing their assets and have been pushing for an expansion in permitted investments for some time.