Innovation to boost insurance sector

China will keep stepping up reform and innovation efforts, give better play to the advantages of insurance funds, and increase support for national strategies and long-term corporate financing, regulatory officials said.

Driven by China's reform and opening-up, insurance funds have maintained a stable and upward trend of development, while their ability to serve the real economy has strengthened significantly.

By the end of November, the balance of fund utilization of personal insurance companies reached 18.5 trillion yuan ($2.8 trillion). Most of the funds are long-term, serving as a stable source of funding for the real economy, the part of the economy that produces goods and services, said Huang Hong, vice-chairman of the China Banking and Insurance Regulatory Commission.

The money was raised by insurance funds through bond and stock investments and non-open market investments. Asset management companies of insurers directly provided financing support for major projects, including new infrastructure construction, new-type urbanization construction, and transport and water projects, via debt and equity investment plans. This kind of investment products have registered funds totaling 3.8 trillion yuan, said Yuan Xucheng, director of the CBIRC's department of supervision of insurance funds utilization.

"China will continue to deepen supply-side structural reform of the financial sector to increase supply of long-term assets, mainly by supporting asset management companies of insurers to set up long-maturity products. The country will also make product innovations according to the financing needs of the real economy to enrich the long-term asset market and foster a transaction market for long-term asset investments," Yuan said.

Regulators will simplify the review and approval process of administrative license projects of insurance asset management companies and push ahead with a registration-based system reform of asset-backed plans established by insurance AMCs to invigorate market vitality.

Meanwhile, China will optimize regulatory policies to support investments by insurance funds in advanced manufacturing, coordinated regional development and major national projects. Regulators will also improve policies on equity investment by insurance funds and insurance private equity funds to provide more long-term capital for corporate entities, Yuan said.

"Other than having long maturities and stable income sources, insurance funds are large in scale. Therefore, improving the long-term investment capability of insurance funds will be favorable for promoting healthy and stable development of the insurance sector on the asset side," said Shen Yandong, an analyst with Vanho Securities, in a research note recently.

The CBIRC will also set different equity investment caps for different insurers with the aim of encouraging those insurers that have strong investment capabilities to increase their equity investment. This will be helpful to guide the flow of medium-and-long-term funds into the stock market, experts said.

"With an increase in size on the liability side of the insurance sector and steady and sound development of the capital market, the scale of equity investment by insurance funds, which mainly feature prudent, long-term and value investing, will increase inevitably. The ability of insurance funds to serve the real economy will keep improving," Shen said.