The new risk prevention guidelines published by the China
Insurance Regulatory Commission (CIRC)
stress both practicability and creativity in requiring insurance
and insurance asset management companies to establish risk
prevention systems for their rapidly growing indemnity funds.
The guidelines follow reports earlier this year that the
government has decided to allow insurance firms to trade stocks
directly to bolster their repayment capacity.
Chinese insurers have been allowed to invest their growing
premium incomes only in bank deposits, treasury bonds, policy bank
bonds and some corporate bonds. Many believe this restrains their
profitability and undermines their ability to settle claims.
Late last month, the CIRC published long-awaited regulations on
insurance asset management companies, clarifying requirements for
establishment and business scope.
But the regulations did not touch on whether or when the
companies would be permitted to trade stocks directly,
circumscribing their investment scope as treasury bonds, financial
bonds--mainly those issued by policy banks--and "other channels
authorized by the State Council."
China's two largest state-owned insurers, the People's Insurance
Co. of China and China Life Insurance Co., established the nation's
first insurance asset management firms last year as part of reform
schemes that culminated in overseas initial public offerings.
(China Daily May 10, 2004)