(Yicai Global) May 16 -- China’s insurance regulator has expanded the investment scope of the country’s insurance sector to include a wider array of financial products such as debt-to-equity investment plans in order to enable the CNY23 trillion (USD3.4 trillion) worth of funds to better serve the economy.

Insurers can now buy into more ‘non-insurance investment products’ such as wealth management products, single asset management plans and debt-to-equity investments, the China Banking and Insurance Regulatory Commission said recently when revising two regulatory documents for the first time in a decade.

The insurance sector has a strong need to diversify the allocation of funds, the commission said. Just 7.39 percent of China’s insurance funds were invested in financial products, such as wealth management products, trust funds and loan asset-backed securities, as of December last year, amounting to CNY1.72 trillion (USD253 billion).

"With the rapid development of China's capital markets, more financial products are emerging, and their risk versus reward balance is in line with insurance funds’ conservative requirements,” the commission said.

"Financial products have become an important asset class for insurance funds’ investment. Now that more wealth management products are included in the new regulations, the pressure on insurance funds’ allocation can be released,” an executive at an insurance funds management firm told Yicai Global.

Along with the downward trend of long-term interest rates, insurance funds are facing difficulties in allocation, and the expansion of the scope of investment in financial products will help ease the pressure, Hai Tong Securities said.

The new rules have also done away with the extremely high qualifications needed by third-party investment firms to handle insurers' money, according to the revised documents Notice on Investment of Insurance Funds in Relevant Financial Products and the Measures for the Administration of Entrusted Investment of Insurance Funds.
Before, only third-party agencies with a minimum of CNY10 billion (USD1.47 billion) of assets under management, registered capital of not less than CNY100 million (USD14.73 million) and no major violations of the law in the last three years could be entrusted. The new rules give insurance

more decision-making space, the executive said.

Editor: Kim Taylor