18 January 2019
Regulators are trying to encourage insurers to invest more in the country's stock market. Photo: Bloomberg
Regulators are trying to encourage insurers to invest more in the country's stock market. Photo: Bloomberg

POLICY WATCH: Dealing insurers a new stock investment hand

It’s a little shuffle of the insurance sector’s investment deck but one the central government hopes will lift investors’ spirits by channeling more funding into the sluggish stock market.

The China Insurance Regulatory Commission is revisiting rules on how much insurance companies can allocate to various investment categories, giving the insurers more of a free hand.

Under existing rules, insurers can put up to 30 percent of their assets in equities, 30 percent in real estate, 20 percent in other financial assets, 15 percent in overseas assets and 5 percent in single fixed-income assets. In the equities category, investment in listed firms must not make up more than 25 percentage points of the 30 percent total, with the rest open to non-listed companies.

The commission’s proposal is to scrap the limits on non-listed and listed companies, opening up the prospect of the full 30 percent quota being put into the stock market  

The suggested tweak is the third new policy to come from the watchdog in weeks to encourage insurers to put more of their premiums into the stock market. Earlier this month, the regulator gave insurers the go-ahead to invest in start-up firms listing on the NASDAQ-like ChiNext board, where media and technology companies are gaining popularity because of government support.

The regulator has also allowed selected insurance firms to put premiums collected from high-yield life policies sold before 1999 into blue-chip shares. That move should help insurers diversify their investment channels and boost their yield.

The latest move reflects Beijing’s desire to reassure investors worried that the resumption of initial public offerings will drag the market even lower. Its plan is to encourage institutional investors to tap the market and soak up the strong funding demand from the long queue of IPO applicants. For all to go well, the insurance regulator will have to work with the China Securities Regulatory Commission, the stock market watchdog, to roll out the policy.

The insurance regulator is also hoping to simplify administration of the sector with a decision not to investigate portfolios in detail. 

– Contact the reporter at [email protected]


EJ Insight writer

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