China's new investment policy opens PE to insurers
China’s Insurance Regulatory Commission (CIRC) has announced a temporary measure on the use of insurance capital which will allow insurance companies to make direct investment in private companies, as well as private equity funds, for the first time.
Under the new regulations, registered insurance companies are allowed to inject no more than 5% of their total assets measured at the end of the prior quarter, either directly or indirectly, into domestic private equity. For indirect investment, such as investments through private equity funds, a maximum of 4% could be invested. It is estimated that the new rule could bring around RMB226 billion ($33.2 billion) into the private equity space in China.
Previously, only a few large insurance companies, such as Ping An Insurance, were permitted to allocate part of their capital into private equity investments, and then only in certain specified industries, and with approval from the CIRC, which was granted a on pilot basis. However, investments in VC firms and unlisted companies in early stages of development have still not yet received the green light to receive capital.
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