Chinese regulator tightens insurers’ stock market investments

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.