Domestic insurers plan to expand overseas through investment
over the long term, but they should ensure they are prepared for
global competition, a senior official said?in Beijing?on
Friday.
The comments by Yuan Li, the spokesman for China's Insurance
Regulatory Commission, followed the sector's first overseas
purchase of a global financial institution.
Yuan also urged Chinese insurers to take full advantage of
domestic opportunities.
On Thursday, Ping An announced that it had purchased 4.18
percent of Fortis for 1.81 billion euros, becoming the largest
shareholder of the Belgium-based financial institution.
Fortis' market capitalization was 48.6 billion euros on October
31, making it one of the top 15 European financial
institutions.
In another development, Yuan disclosed that the commission had
provided an opinion letter to securities authorities on the listing
plans of China Pacific Insurance, which will involve?one
billion yuan-denominated A-shares on the Shanghai bourse and no
more than HK$900 million-denominated H-shares on Hong Kong stock
market.
China Reinsurance Group, the country's largest reinsurer with a
market share of 80 percent, might also list in the future, he
said.
The spokesman said that 20 insurers had acquired qualified
domestic institutional investor (QDII) status, and many have
targeted the Hong Kong stock market.
Yuan declined to disclose the quotas for these insurers but
confirmed that no limits had been set on their investment on the
Hong Kong bourse. Another three insurers were under consideration
for QDII status, he said, without giving further details.
To ease the pressure from China's massive foreign exchange
reserves, China launched the QDII scheme last July, allowing
mainland institutions and residents to invest overseas through
mainland commercial banks. The program also allows insurance
institutions to invest some of their assets in foreign fixed-income
and money market instruments.
Yuan said that China's insurance market has grown solidly.
Between January and October, premium income rose 24.2 percent
year-on-year, to 583.54 billion yuan (US$79.07 billion).
From the time the Insurance Law was enacted in 1995 through the
end of October this year, insurance companies had put 2.63 trillion
yuan into capital markets. The 1995 law expanded insurers'
investment options, which had previously been limited to bank
deposits and government bonds.
Of the total invested to date, the biggest share of 41 percent
or 1.07 trillion yuan went to bonds. Stocks, equities and funds
accounted for 683.09 billion yuan, while bank deposits totaled
733.2 billion yuan.
Insurers' capital market investments were up 34.9 percent during
the first 10 months of 2007. The insurance fund generated 242.185
billion yuan in operating proceeds during that period, registering
an average yield of 10.87 percent, Yuan said.
Yuan played down the negative impact of rising interest rates on
life insurance products. The one-year benchmark deposit rate had
risen five times this year to 3.87 percent as of late September,
well above the 2.5 percent fixed rate that life insurance products
offer.
"The impact is not much overall. After all, life insurance
products are not solely for investment, as bank deposits and
equities are," he said.
He reaffirmed that regulators were still pondering an adjustment
in the fixed interest rate for life insurance products.
(Xinhua News Agency November 30, 2007)
