The China Insurance Regulatory Commission (CIRC) has issued a circular stipulating guidelines for investment in securities by insurance companies.
The key guidelines are as follows:
- Insurers can invest a maximum of 5% of their total assets in a single stock and a maximum of 30% of their total assets in equities
- Investment in a listed company by insurance companies is divided into three categories:
- Ordinary equity investments: For holdings of less than 20% of the shares of the investee company, the insurer must maintain a minimum solvency ratio of 100%
- Major stock investment: For holdings of 20% or more of the shares of the investee company, the insurer must maintain a solvency ratio of at least150%
- Acquisition of a listed company: For direct or indirect control of the investee company, the insurer must maintain a solvency ratio of at least 150%
- Insurers must use their own funds to acquire a listed company
- Insurers must seek approval from the CIRC for acquisition of a listed company
- Insurers must report to the CIRC on acquisition of equity stake that exceeds 5% of a listed company’s total shareholdings
The guidelines will take effect immediately.