(Yicai) Feb. 10 -- China has launched a pilot program allowing 10 insurance firms to invest in gold as part of their medium-to-long-term asset allocation strategies because of low interest rates, shrinking investable assets, and rising gold prices.

People's Insurance Company of China, China Life Insurance, China Pacific Property Insurance, China Pacific Life Insurance, and six other insurers can conduct gold investment activities effective immediately, the National Financial Regulatory Administration said in a statement released on Feb. 7.

The 10 insurance companies can potentially inject CNY200 billion (USd27.4 billion) into the gold investment market through the pilot scheme, according to a research report by China Merchants Securities.

The pilot program will be beneficial to deepen reforms for the use of insurance funds and promote the high-quality development of the insurance industry, the NFRA noted, adding that it will closely monitor the program's progress, enhance its supervision and effectiveness, and ensure the healthy development of insurance funds’ investments in gold.

Spot contracts for gold, deferred delivery contracts for gold, centralized pricing agreements, spot inquiry contracts, swap contracts for gold inquiries, and gold leasing operations listed or traded on the Shanghai Gold Exchange were included in the scope of the pilot scheme.

By limiting the scope of the pilot to contracts and gold leasing services listed or traded on the SGE, the NFRA ensures that insurance funds' investments in gold are fundamentally safeguarded, said Yang Juan, senior researcher at the Bank of China Research Institute.

Insurance companies participating in the pilot program must adhere to investment proportion requirements, with the total book value of gold investments not exceeding 1 percent of their total assets at the end of the previous quarter.

Norms for pre- and in-process management of insurers' gold investments were also set. For instance, insurance firms should use methods such as bulk trading, inquiry-based transactions, and competitive bidding to gradually build up their positions and avoid market disruptions due to abnormal trading behavior.

The closing price of Au99.99 on the SGE was CNY668.99 (USD91.55) per gram on Feb. 7, up 9 percent from the beginning of the year and nearly 140 percent from a year earlier.

Editor: Futura Costaglione