CIRC gives nod to insurance firms' private equity funds

The China Insurance Regulatory Commission issued a guideline on Friday to allow insurance companies to establish private equity funds to invest in key strategic industries supported by the government.

The purpose is to broaden investment channels for insurance funds and to provide funding for the country's major infrastructure projects, cash-strapped smaller companies and emerging industries such as Internet finance, CIRC official Zeng Yujin said at a news conference.

"Insurance funds previously had very limited investment channels such as bank deposits or bonds. The new guideline will allow them to invest in companies' equities so that insurance funds can better serve the economy," Zeng said.

The regulator has approved two insurance asset management companies to establish PE funds, and more applications are already in the pipeline, Zeng said. Sun Life Everbright Life Insurance Co was the first insurance company to establish a PE fund earlier this year. Its initial fund managed to raise 500 million yuan ($78.4 billion), which invests in the share transfer system of unlisted companies.

The total asset value of China's insurance sector reached 10 trillion yuan last year. Insurance companies are allowed to invest up to 30 percent of their total assets in equity markets, which means that more than 3 trillion yuan could be allocated to equity-related assets.

The regulator said that insurance funds are also encouraged to invest in asset-backed securities to diversify their asset allocation channels.