China to Release Rules for Insurers to Invest in PE

Detailed rules for insurers in China to invest in equity in unlisted domestic companies will be released by the China Insurance Regulatory Commission (CIRC), the top Chinese insurance regulator this month, said sources.

The CIRC has completed soliciting opinions from the public for the proposal and during the past three months, it discussed with top executives of leading Chinese insurers including China Life Insurance Co., Ltd. (NYSE: LFC, SEHK: 2628, and SSE: 601628), Ping An Insurance (Group) Company of China, Ltd. (SHSE: 601318 and SEHK: 2318), China Pacific Insurance (Group) Co., Ltd. (CPIC and SHSE: 610601) and The People's Insurance Company (Group) of China (PICC) about the issue.

The rules have been finalized and the reason why the watchdog has not unveiled them is that the National Development and Reform Commission (NDRC), the nation's top economic planner, will unveil regulations on the management of equity investment funds. Only after that, the rules could be released.

According to the rules, the capital insurers in the country are allowed to invest via the channel will account for at most ten percent of their assets, compared to an eight percent previously. And the proportions for them to invest in debt and equity are six percent and four percent each, compared to previously five percent and three percent.

The capital utilization outstanding of insurers nationwide reached CNY 3.4 trillion as at the end of June 2009. It indicates that as much as CNY 136 billion of it will be allowed to invest in equity in unlisted domestic companies by then. The figure will hit CNY 340 billion plus the part that will be used to invest in debt in such companies.

Insurers in the country are allowed to invest in equity in unlisted domestic companies from last October; however, there are no detailed rules to guide them. Despite that, they are busy making preparation for such investment. For instance, PICC and Ping An each set up an capital operation unit.

It is a gradual process, said an industry observer. In addition to equity in unlisted companies specializing in traffic, energy and communications, they are allowed to inject into equity in unlisted companies focusing on medical treatment and etc. this time. Qualified small- and medium-sized insurers are allowed to directly stretch out reach to the filed, too.

(USD 1 = CNY 6.83)

Source: www.cnstock.com (October 13, 2009)

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