In­sur­ers re­stricted

Reg­u­la­tor to limit spec­u­la­tive use of in­sur­ance funds

China Daily (Hong Kong) - - FRONT PAGE - By WU YIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

The China In­sur­ance Reg­u­la­tory Com­mis­sion hopes to reduce the pro­por­tion of to­tal eq­uity as­sets held by in­sur­ance funds to 30 per­cent. The limit was raised to 40 per­cent last year.

The move in­di­cates the reg­u­la­tor wants to im­prove reg­u­la­tory mea­sures against the short-term and spec­u­la­tive use of in­sur­ance funds.

CIRC Vice-Chair­man Chen Wei­hui said in an ar­ti­cle pub­lished on Wed­nes­day in Peo­ple’s Daily that the reg­u­la­tor is plan­ning to in­tro­duce mea­sures to curb spec­u­la­tive use of in­sur­ance cap­i­tal in in­vest­ing in the stock mar­ket, in­clud­ing for­bid­ding in­sur­ers and non-in­sur­ance in­sti­tu­tions from jointly ac­quir­ing listed com­pa­nies, clar­i­fy­ing that in­sur­ance com­pa­nies shall use their own cap­i­tal, in­stead of in­sur­ance funds, for ma­jor in­vest­ment in the stock mar­ket, and re­quir­ing in­sur­ance com­pa­nies to file with the CIRC when they make ma­jor stock in­vest­ments, and gain ap­proval from the CIRC to ac­quire listed com­pa­nies.

The CIRC will also set re­stric­tions on the level of in­vest­ment in­sur­ance firms can have in listed com­pa­nies, re­duc­ing it from the pre­vi­ous 10 per­cent to 5 per­cent, said Chen.

Reg­u­la­tors have dis­patched in­spec­tion teams to Ever­grande Life In­sur­ance Co and Fore­sea Life In­sur­ance Co, two in­sur­ers that have al­legedly been in­volved in in­ap­pro­pri­ate use of cap­i­tal and un­clear as­set al­lo­ca­tion, said Chen.

The two in­sur­ers’ com­bined bal­ance of stock in­vest­ment was 57.4 bil­lion yuan ($8.31 bil­lion), 3 per­cent of the com­bined in­vest­ment of in­sur­ance funds in the A-share mar­ket, said Chen.

Xiang Junbo, CIRC chair­man, also said at a con­fer­ence on reg­u­lat­ing in­sur­ance firms’ in­vest­ment in the equi- ty mar­ket that it will draw up a “neg­a­tive list” and fur­ther clar­ify for­bid­den ar­eas and in­vest­ment be­hav­ior norms to bet­ter reg­u­late in­sur­ers’ ac­qui­si­tion be­hav­ior.

Xiang said in­sur­ers should play a part in sta­bi­liz­ing the mar­ket as in­sti­tu­tional in­vestors, but some re­cent activities con­tra­dict this goal, do­ing sig­nif­i­cant harm to the in­sur­ance sec­tor’s im­age and its long-term de­vel­op­ment.

China’s in­sur­ance cap­i­tal needs to serve the long-term and healthy de­vel­op­ment of the in­sur­ance sec­tor, and should not turn in­vest­ment into spec­u­la­tive buy­outs, said Xiang.

Wang Guo­jun, an in­sur­ance pro­fes­sor at the Univer­sity of In­ter­na­tional Busi­ness and Eco­nom­ics in Beijing, said the point of in­sur­ance is fun­da­men­tally for pro­tec­tion, and this should also be the case with the use of in­sur­ance funds.

“Only long-term, value-ori­ented and sta­ble in­vest­ment sup­ports the real econ­omy and the sta­ble, healthy de­vel­op­ment of the cap­i­tal mar­ket,” said Wang.

CITIC Se­cu­ri­ties Co said in a research note that bet­ter reg­u­la­tion of the use of in­sur­ance funds benefits both the in­sur­ance and stock mar­kets.

Only long-term, value-ori­ented and sta­ble in­vest­ment sup­ports the real econ­omy ...” Wang Guo­jun, a pro­fes­sor at the Univer­sity of In­ter­na­tional Busi­ness and Eco­nom­ics

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