investment rules

Relaxation in investment rules puts the spotlight on technology for Chinese insurers

Peter LiuRegional Sales Director, Eagle Investment Systems

In 2012, the China Insurance Regulatory Commission (CIRC) began relaxing the restrictions on permitted investments for insurance firms, opening the door for insurers to look beyond domestic fixed-income products and pursue investments in new asset classes such as equities and alternative assets, as well as offshore investments. While insurers in China have cheered the CIRC’s actions, the Commission’s increasingly progressive stance is exposing some of the shortcomings of Chinese insurers’ technology and systems that underpin their investment strategies.

In 2014, for instance, insurers were able to invest in private equity for the first time, while the proportion of assets that could be invested overseas has been extended from 5% to 15% of total assets. This relaxation offers obvious benefits, as insurers can target investments with potentially greater returns and higher yields, while eliminating some of the risk of being overexposed to Chinese bonds. Still, while many firms have been waiting to see what their peers will do before making any bold moves, the CIRC’s relaxation efforts have already had an effect on allocations. According to industry research, in the 12-months trailing January 31, 2015, alternative investments surged 66.4% to Rmb2.3tn and accounted for 24% of total insurance investments in the period. In contrast, investments in bank deposits and bonds grew by around nine percent in the same period.
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