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China regulator adds, revises asset management rules.

Over the past few months, the China Insurance Regulatory Commission has imposed rules to strengthen information disclosure, relaxed rules related to infrastructure investment and added rules to strengthen supervision of the integrated type of life insurance and asset management products.

The CIRC said insurers' information disclosure, risk control and management are of concerns for the industry, which has grown rapidly with the expansion of insurance funds in various investment channels. The new rules will enhance the scope of information disclosure, standards, details and legal liability of insurance investment.

Insurance companies now need to submit quarterly reports on their investment transactions to the regulator. The required information also must be posted on the websites of the company and the Insurance Association of China.

The new rules aim to increase transparency and fairness of investment transactions. The CIRC also said insurers need to improve their internal control and asset liability management.

Infrastructure Investment

In early July, the CIRC relaxed its rules on infrastructure investment, broadening investment channels--which had been restricted to transportation, telecommunications, energy, municipal development and environmental projects. The CIRC said these five categories will no longer satisfy insurers' infrastructure investment demands.

The relaxation is part of the market-oriented reform in China, supported by prudent risk management and corporate governance, the CIRC said. The regulator will simplify the process for the approval of infrastructure investments; however, insurers have to meet the requirements for risk management and information disclosure.

Insurers' infrastructure investment is an essential funding source to support the country's economic development. By the end of May, the CIRC said insurance companies invested 894 billion yuan (US$134 billion) into infrastructure projects since the opening of the policy on infrastructure investment in 2013. Insurance investments have focused on transportation, energy and municipal development projects with 400 billion yuan, 229 billion yuan and 78 billion yuan, respectively.

Infrastructure investment offers a stable channel for insurers' asset management and long-term liability needs. Insurance investment also contributes an important capital source for the country's major construction and social development projects. For example, the CIRC said the industry invested 16 billion yuan on the Beijing-to-Shanghai speed train project and 55 billion yuan on the eastern transportation network project.

The new rules aim to promote insurance asset management's long-term development, and the move is part of the structure reform for the industry, with the widening of investment channels for insurers and enhancing their capability on product development.

However, the CIRC said it will strengthen supervision of insurers' risk management and framework, with the introduction of a risk-reserve system. The infrastructure entity should not have an improper credit record in the past two years. The regulator also promotes the public-private partnership model for infrastructure investment.

Stronger Supervision

In June, the CIRC issued new rules to strengthen supervision of the integrated type of life insurance and asset management products.

The supervision focuses on product filings, information disclosure, internal risk control, distribution and asset liability management. The regulations further strengthen supervision of insurance asset management companies since the issuance of guidelines for the introduction of such business in 2013.

Insurance holding companies, insurers and insurance asset management companies in China with stronger risk-bearing capabilities were allowed to operate asset management businesses in February 2013, according to a notice. The notice clarifies the qualifications of companies that can operate asset management businesses, the type of products that can be issued, the scope of investors and the audit procedures for issuing products.

The CIRC said the new rules aim to enhance products and risk management capabilities of a company, along with a comprehensive supervisory and monitoring system. The new regulations provide guidance for insurance asset management companies on product development.

This past May, the CIRC issued guidelines on information disclosure for insurance companies' investments, enhancing requirements for investments in unlisted companies and real estate. Insurance companies, groups and subsidiaries, including asset management firms, have to comply with the new rules on information disclosures and reports related to their investment activities. The rules aim to establish a comprehensive framework for information disclosure of insurance investments as part of a modem and multilayered risk control regulation. The regulator aims to raise the transparency of insurance investments and to strengthen the supervision of market-oriented investment trends.
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Title Annotation:Asset Management
Author:Lai, Iris
Publication:Best's Review
Date:Sep 1, 2016
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