Insurance investment rules released

Will allow more capital to be used to aid small firms

China Insurance Regulatory Commission (CIRC) said Monday that it had issued a notice governing insurers' investment practices in venture capital funds, unlocking an additional 200 billion yuan ($32.3 billion) worth of insurance capital for high-tech and small and micro-sized enterprises.

The notice is aimed at implementing a guideline issued by the State Council, China's cabinet, to speed up the development of modern insurance services, CIRC said in a statement on its website on Monday.

The State Council issued a set of new regulations on August 13 with the aim of channeling more capital flows from the insurance sector to strategic emerging industries.

Insurers are required to invest only in emerging industries, small and micro-sized enterprises as well as key high-tech enterprises that fall within the range of the central government's industry support policies, read the statement.

The statement posted on Monday requires insurers to invest no more than 2 percent of their total assets into venture capital funds, and purchase no more than 20 percent of the issuing scale of a given fund.

In the meantime, the notice requires corresponding funds to invest no more than 10 percent of its issuing scale when investing in a single start-up company.

Huang Jianzhong, a finance professor at Shanghai Normal University, said such an arrangement could help safeguard the safety of premiums.

"The venture capital, with a diversified portfolio, has a relatively lower risk compared with other forms of high-risk, high-return investments such as investing in stocks of start-ups," Huang told the Global Times Monday.

To date, Chinese insurers have already channeled as much as 50 billion yuan to small, medium and micro-sized enterprises via share purchase, equity investment, and project assets support schemes, CIRC said on its website Monday.

Based on the scale of the Chinese insurance sector at the end of October, the move could indirectly free some 200 billion yuan insurance capital for China's cash-hungry small companies, the statement said.

CIRC said insurers could further explore the platform offered by the venture capital fund to provide extra capital to small and micro-sized enterprises to ensure their sound development.

In the first 10 months of 2014, China's total insurance premiums rose by 18.25 percent from a year earlier to 1.73 trillion yuan, the latest official statistics showed.