Foreign insurance executives have welcomed a decision by the China Insurance Regulatory Commission (CIRC) to allow a mainland insurance company to invest more of its assets in the domestic stock market. The decision, which allows China Pacific Insurance to invest as much as 15 per cent of its assets in mainland mutual funds, is the latest indication the CIRC is moving with increasing speed to loosen restrictions on how insurance companies invest capital. Mainland regulations require local insurers to place the bulk of their assets in bank deposits and government treasury bonds but successive central bank interest-rate cuts have squeezed margins, leading to an industry-wide call for the implementation of more dynamic investment vehicles. How much pressure the investment restriction and low interest-rate regime is creating is anybody's guess but People's University insurance industry scholar Zhang Hongtao was quoted in the China Daily yesterday as saying the imbalance may reach 162.3 billion yuan (about HK$151.9 billion) over the next 10 years. In October, the CIRC began allowing insurers to invest 5 per cent of their previous year's total capital assets in mutual funds. In March, the regulator increased that to 10 per cent for four local insurance companies - Ping An Insurance, New China Life Insurance, Taikang Life Insurance and Huatai Insurance. Chubb Group of Insurance Companies regional manager Ian Lancaster said the China Pacific decision was an important development. 'One of the biggest problems is the lack of investment instruments. It is another step towards flexibility that hopefully will . . . produce higher returns,' he said. Many industry watchers believed the 15 per cent ratio represented a ceiling on insurance investment in mainland mutual funds. There are only 10 closed-end mainland funds and allowing companies to invest more of their assets was, in the words of one executive, 'potentially destabilising'. Insurance executives said the next important move was likely to come when securities officials establish the country's first open-ended mutual funds. China Securities Regulatory Commission chairman Zhou Xiaochuan indicated last month such a move was likely soon. Outside mutual fund investment, Beijing has also indicated its willingness to permit insurance companies to develop unit-linked policies, which provide variable returns based on the performance of the assets to which they are linked.