Insurance funds get bigger role in real economy

More capital to be channeled into strategic sectors

Insurance funds will play a bigger role in supporting China's real economy following the announcement of a set of new policies for the world's most important emerging insurance market, a senior insurance regulatory official said Wednesday.

The insurance industry has played its part in the upgrade of the economy, with some of the insurance funds having been used for major infrastructure construction projects and financing small businesses, Wang Zuji, vice chairman of the China Insurance Regulatory Commission (CIRC), told a news conference in Beijing.

As of June 2014, the amount of insurance funds used for the development of the real economy had reached 3.6 trillion yuan ($585.17 billion), according to Wang.

With a set of new regulations released on August 13 that attach greater significance to the nation's insurance sector, the commission will be drafting policies to allow more capital flows from the insurance sector to strategic emerging industries, major infrastructure projects and people's livelihood-related projects, he disclosed, without giving a timetable for drafting the proposed follow-up policies.

The new regulations stipulate that insurers will be provided with a broader investment pipeline to dive deeper into economic activity, through ways that include the exploration of insurers' investment in and launch of asset securitization programs. Back in 2010, the CIRC gave green light to insurers to invest in private equity and real estate.

In a set of measures published on the second day of the release of new insurance guidelines, the State Council also urged more insurance funds to be channeled into the real economy, as part of across-the-broad efforts to ease concerns of small businesses over a credit crunch.

While hailing the new regulations as a forward step in boosting the insurance sector's contribution to the ongoing economic rebalancing, market watchers remain cautious about any big short-term changes.

Deeper involvement of insurance funds in the financial system requires unprecedented changes in the current investment models available for insurers, Lu Hongjun, president of the Shanghai Institute of International Finance, told the Global Times Wednesday.

The new regulations, which paint a bright future in terms of the contribution of insurance to the overall economy, might not be entirely inspiring for insurers, said Hao Yansu, dean of the School of Insurance at the Central University of Finance and Economics.

Fund safety and proceeds would always be the top priority of insurers when it comes to investment, which may sometimes run counter to the policymakers' wishes, Hao told the Global Times Wednesday.

Nonetheless, the country's insurance market, which has registered tremendous growth over the past few years, is expected to continue its momentum, if not a massive jump, following the new regulations, according to analysts.

China has already become the world's fourth-biggest insurance market as measured by insurance premiums, Li Pumin, secretary-general of the National Development and Reform Commission (NDRC), revealed at the news conference.

In the first half of this year, China's total insurance premiums rose by 20.78 percent from a year earlier to 1.15 trillion yuan, the latest official statistics showed.

The number of insurance institutions in China has also grown from 107 in 2006 to 178 so far, according to NDRC's Li.