China’s insurance regulator has issued draft rules removing most restrictions on insurance companies’ equity investments.
Current regulations allow insurers to invest in equities only in other insurers and other firms that have businesses related to insurance, such as pension, healthcare, and auto services, reports Regulation Asia. These investments are limited to 30% of an insurer’s assets.
The draft rules issued by the CBIRC (China Banking and Insurance Regulatory Commission) enable insurers to form specialised funds to boost their equity investments, on the condition that they have not been subjected to administrative penalties in the past three years.
The CBIRC said that the rules seek to provide long-term capital support to listed companies, reducing leverage, and supporting the real economy.
By the end of 2017, China’s insurance industry had RMB16.8 trillion (US$2.7 trillion) in combined assets, with almost 14% invested in mutual funds and stocks.
The move comes after China’s stock market dropped to its lowest level in almost four years, in tandem with increased investor concern over the ongoing trade disputes with the United States.
When the draft rules are adopted, insurers will be able to make strategic investments and take part in private placements and block trades in listed companies, as long as these investments make up no more than 20% of the fund’s total assets. They will also be able to invest in publicly issued bonds and convertible bonds through private placements by listed companies.