China Issues Rules for Insurance Companies’ Asset Management Products
China’s banking and insurance regulator issued new rules specifying how insurance companies can invest asset management product funds and spelling out the qualifications for investors in such products.
The regulations, taking effect May 1, clarify requirements for a $390 billion market and are part of a long-running project by financial regulators to erect a framework for an industry that manages billions of dollars of investors’ funds.
The asset management rules create industry-specific policies to supplement sweeping new regulations issued in 2018. The overarching regulatory framework covers all financial institutions including banks and insurers and is scheduled to take full effect next year after a grace period for institutions to come into compliance. But an official from the China Banking and Insurance Regulatory Commission (CBIRC) recently signaled a possible delay as some enterprises may have trouble meeting the original deadline partly because of the Covid-19 outbreak.
In September 2018 the CBIRC issued industry rules for banks’ wealth management businesses, the major segment of China’s asset management industry.
The policy document for insurance companies’ asset management products will put the industry in line with the general rules and set transparent, standardized, unified requirements for the business, the CBIRC said. Compared with other financial institutions, insurance companies’ asset management products have largely remained prudent and focused on long-term investments with lower risks of excessive leverage, the regulator said.
In line with the general rules, the policy document specifies that insurers can invest asset management products in government bonds, central bank bills, corporate bonds, deposits, interbank deposit certificates, mutual funds, securities and other equity assets.
Insurers must also make sure that investments using insurance funds follow separate requirements on the investment scope of such funds.
The new rules also spell out qualifications of public investors who can put money into insurers’ asset management products, the threshold of their investments in different types of products and agents who can market such products.
By the end of 2019, the outstanding value of insurance asset management products totaled 2.76 trillion yuan ($390 billion), including 1.27 trillion yuan invested in the bond market, 0.12 trillion yuan in equities and 1.37 trillion yuan in mixed assets, CBIRC data showed. Infrastructure projects including transportation, energy and water projects are the main targets of long-term investments involving insurance funds.
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