The China Insurance Regulatory Commission (CIRC) recently issued Interim Measures on Investment of Insurance Funds in Private Equity (PE Measures) and the Interim Measures on Investment of Insurance Funds in Real Estate (RE Measures). These became effective on 5 September 2010.
The PE Measures and RE Measures set out detailed guidelines under which insurance companies may invest in private companies and private equity funds. The PE Measures provide that, subject to meeting certain qualification requirements, an insurance company may invest up to 5% of its total assets in other insurance companies, finance companies, elderly care facilities or hospitals that are related to the insurance industry. An insurance company is prohibited from investing in venture capital funds or setting up its own private fund or fund management company. The RE Measures permit an insurance company, subject to meeting certain qualification requirements, to invest up to 10% of total assets in commercial real estate, office buildings, elderly care homes and hospitals, but prohibit an insurance company from investing in residential property, developing real estate, or establishing real estate development companies.
The two Measures also prescribe requirements on analysing and monitoring the investment activities of these types of investments by an insurance company.