Recent comments by the head of China's insurance industry regulator suggest mainland insurers may soon be given more freedom to invest their premiums, analysts say. At an annual work meeting last week, China Insurance Regulatory Commission (Circ) chairman Wu Dingfu endorsed in principle the establishment of insurance asset management companies (AMCs). Common in most insurance markets, AMCs are specialised units established by insurers to maximise returns on their premium income. In China, however, insurers face stringent curbs on their investment activities. They can invest no more than 25 per cent of their capital in higher-return equities and selected corporate bonds. And overseas and direct equity investments are prohibited outright, forcing mainland insurers to park at least three-quarters of their assets in low-yield bank deposits and treasury bonds. Insurers have been lobbying Circ for years to lift - or at least relax - the curbs. At the end of last year speculation was rife that insurers would be allowed to invest directly in equities. But in the end they were disappointed. Nomura International Hong Kong regional insurance analyst Karen Chan said: '[Mr Wu's] remarks imply China will soon liberalise investment channels for insurance funds. 'It is only natural that insurers in China be able to do what insurers in the rest of the world are free to do.' Ms Chan said because of the curbs, Chinese insurers could expect a return of only 3 to 4 per cent on their capital this year, against an industry standard of 4 to 6 per cent elsewhere in the region. BOC International vice-head of research Anthony Lok said AMCs were particularly vital for life insurers, given the longer terms of their policy liabilities. 'The key is to make sure that the maturity profile, yield on investment and risks should be able to cover any eventuality on the liability side of the business,' Mr Lok said in a recent report. 'In practice, this means that insurance firms should make sure the duration of assets are matched with their liabilities, currency exposure and loss risks are balanced, and long-term yields on assets are sufficient to cover the payout on liabilities.' Ms Chan estimated that, held back by their inability to maximise capital returns, Chinese insurers' liabilities could exceed their assets by as much as 50 billion yuan (about HK$46.94 billion), threatening some with insolvency.