More investment options for insurers

China's insurance regulator has widened the overseas investment scope of domestic insurance companies and expanded the categories of assets they can invest in, to boost their investment returns amid the sluggish stock market.

The China Insurance Regulatory Commission said on Monday it had loosened the restriction limiting mainland insurers to invest only in Hong Kong, to 45 countries and regions, including 25 developed economies and 20 developing economies such as Brazil and India.

Meanwhile, approved asset categories have also been expanded from equities and bonds to real estate, currency products and non-bond fixed-income products.

Investments in overseas real estate markets, however, will be restricted to commercial properties in prime locations or real estate investment trusts, the commission said, and any overseas investments will be limited to less than 15 percent of the company's total assets.

At the end of last year, assets held by Chinese insurers totaled 6 trillion yuan ($960 billion), with an estimated 900 billion yuan invested overseas, which is too low, according to some industry insiders.

"Now is a good time to invest overseas, as the global economic recession has led to a comparatively low asset price," said Qin Xiaomei, chief researcher at Jones Lang LaSalle Beijing, an international real estate service provider.

"For Chinese insurers, commercial property in major cities such as New York and London will be a safer investment bet as the risks there will be much lower than those in emerging markets."

Given the high price of commercial property at home, the annual yield of a commercial property investment in Tokyo is higher than that in Beijing, according to Qin.

The industry watchdog has also widened the category of investments available to Chinese insurers at home, increasing the share of total funds they can invest in wealth management products, trust products, and infrastructure projects.

The moves are the latest in a series by the commission this year, aimed at helping insurers diversify their investment channels.

Chinese insurers can invest up to 20 percent of their assets in stocks, and most of them are highly vulnerable to domestic capital market fluctuations.

The country's volatile stock market dropped more than 20 percent last year, just as most of the country's insurers struggled with their own financial performance.

China Life Insurance Co Ltd, for instance, the world's largest insurer by market value, issued a profit warning last Thursday, signaling its first quarterly loss since 2008.

"One of the key reasons for the insurers' flat performance is that investment channels were too limited, and the majority of their capital went into deposits, bonds and stocks," said one investment manger at an insurance asset management company, who declined to be named.