The decision by the National People's Congress Standing Committee to allow mainland insurers to invest in the real estate market will provide fresh funding for cash-strapped developers, experts say. It will also broaden earnings sources for insurers that rely largely on income from government and financial bonds. Liu Yingqi, the vice-president of China Life Insurance, said the company welcomed the change and expected detailed investment rules to follow soon. 'We focus on long-term value and that is what real estate investment could bring. Most importantly, it should generate stable returns,' Ms Liu said. The amended insurance law passed by the standing committee on February 28 will take effect on October 1 and includes measures to protect the benefits of customers and tightened controls over insurers' solvency. Yang Huabai, the director-general of the China Insurance Regulatory Commission's legal affairs unit, said the regulator would work out detailed rules specifying what percentage of total assets insurers would be allowed to invest in property. The legislation would attract more big and small insurance companies to invest in the property industry, said Chris Chow, the director of Jones Lang LaSalle's Asia capital markets in Greater China. 'Insurance companies seek stable and long-term returns, and real estate such as quality commercial properties is perfect for them,' said Mr Chow. Earlier, insurers could invest only in government and financial bonds. In 2006, they were allowed to invest directly in stocks but the timing was poor and a plunge in the A-share market saw earnings take a beating. The average investment yield in the industry for the third quarter of last year was about 2.1 per cent, down from a peak of 10.9 per cent at the end of 2007, analysts said. Insurers were now allowed to build or buy property for their own use, said Mr Chow. But he said some insurers such as Ping An Insurance (Group) had already invested in the sector through trusts or asset management subsidiaries. Ping An, through its China Ping An Trust & Investment, has been active in the property market. It paid 3.5 billion yuan (HK$3.97 billion) for Mei Bang International Centre in Beijing in 2007 and acquired stakes in property companies to directly invest in the sector. Some other property players had dodged current restrictions by reserving a small percentage for own use while applying the rest for rental purposes, property consultants said. Since the announcement of the change, developers and private equity real estate fund managers had been approaching insurers for co-operation possibilities, Mr Chow said. He said he expected insurers would prefer to invest directly in hard assets such as entire completed commercial buildings, or team up with mainland developers to invest in the market. Total assets of mainland insurers are estimated at 3.38 trillion yuan, according to the China Banking Regulatory Commission. Outstanding operating capital amounts to 3.05 trillion yuan. Meng Xiaosu, the chairman of China National Real Estate Development Group, said if 8 per cent of insurers' assets under management was freed for property investment, it would amount to 240 billion yuan and give a big boost to the sector. Last year, Beijing Normal University said in a research report the property market was facing an estimated capital shortfall of 673 billion yuan.