China Loosens Regulations For Insurers

by Mary Swire, for LawAndTax-News.com, Hong Kong

27 April 2004

Under new rules issued by the China Insurance Regulatory Commission at the weekend, domestic insurers will be allowed to set up asset management companies through which to channel premium income, in order to maximise returns on premium reserves.

Although two Chinese insurance firms, China Life Insurance and PICC Property and Casualty, already have such an arrangement in place under special dispensation from the State Council, the announcement was welcomed by the rest of China's insurers, which have been obliged to manage premium income via smaller internal investment divisions, which are now buckling under the strain of large capital reserves.

According to the South China Morning Post, the new rules stipulate that general insurers wanting to establish an asset management company must have net asets of at least one billion yuan and total assets of at least five billion yuan, whilst life insurers must have combined assets of more than ten billion yuan.

Having established a designated asset management firm, non-life insurers must reportedly invest at least 50% of their assets via the unit, with life insurers obliged to invest a minimum of 80%.

The SCMP also revealed that asset managers can be partially owned by entities other than the insurance firm, but that at least a 75% stake must be retained by the latter.

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