China to expand insurers' investment scope
The China Insurance Regulatory Commission (CIRC) is likely to announce a new set of rules allowing insurers to expand their investment scope in order to diversify portfolios. As part of the move, the ceiling for domestic private equity investments will also be raised.
The regulator opened the door to private equity and real estate in 2010, announcing that registered insurance companies could inject up to 5% of their total assets, either directly or indirectly, into domestic private equity. A further set of rules is expected to be released soon, following a two-day meeting between the CIRC and industry professionals held this week, Shanghai Securities News reported.
It is suggested that the regulator will broaden insurers' investment remit to include foreign private equity funds, depository certificates, real estate, and other investment vehicles. Domestically, investments will be permitted in leading companies in agriculture, energy and natural resources.
One attendee added that insurance companies might also win approval to trade in financial derivatives domestically and overseas. However, it will be limited to stock index and bond futures for hedging purposes only.
The participation of insurance companies as LPs is seen as crucial to the long-term sustainability of domestic private equity.
Last month, China Life Insurance injected RMB2 billion ($315 million) into CITIC Private Equity's renminbi-denominated fund. This followed a RMB1.5 billion investment in Hony Capital's most recent local currency vehicle.
CITIC Private Equity is currently raising a new renminbi-denominated fund with a target size of RMB12 billion - the successor of Mianyang High Technology Industrial Fund closed in 2010. China Life's commitment will account for a little over 16% of the total fund corpus. The vehicle is expected to close in June, a source close to the fundraising activity told AVCJ.
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