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SCMP Reporter

Beijing has widened insurers' access to infrastructure debt and real estate while keeping the cap for equity investment unchanged.
According to the final rule on the use of insurance funds, issued by the China Insurance Regulatory Commission (CIRC), mainland insurers can invest up to 10 per cent in debts related to infrastructure projects. The new investment ceiling was raised from 6 per cent for life insurers and 4 per cent for property insurers.
'The widened channel for infrastructure investment gives insurers more chances of profiting from the nation's fast-growing economy,' said Guotan Junan Securities analyst Luo Lei. 'Insurers will by all means increase their exposure to infrastructure debt.'
Beijing hopes to make greater use of insurance funds as it revs up infrastructure construction around the country. Before, the insurance regulator had no clear-cut investment limits on real estate.
Analysts estimated that 5 per cent of the nation's 4.2 trillion yuan (HK$4.81 trillion) insurance assets had been invested in real estate.
The new rule complies with the regulator's promises to widen insurers' investment channels.
It was also seen as a move to expand funding sources for growing public works projects.
An increasing capital inflow from the insurers could facilitate Beijing's multi-trillion-yuan railway construction plan, for instance. Beijing expected the private sector to contribute 40 per cent of railway project's financing, but its contribution currently stands at less than 5 per cent.
The CIRC will also allow insurers to invest up to 5 per cent of their assets to buy into unlisted companies.
Insurance firms can invest 20 per cent of their assets into stocks and equity-focused funds. Mainland media had reported that the CIRC would raise the investment cap to 25 per cent earlier this year, but analysts said the regulator was still wary of stock market volatility.
'The 5 per cent investment in unlisted companies will have a far-reaching significance as insurers seek high returns while investing in high-risk businesses,' said Dazhong Insurance fund manager Wu Kan. 
Mainland insurers have taken a heavy beating from the weak stock market this year.
According to Shanghai Securities News, insurers lost more than 10 billion yuan from the market in the first four months of this year.
Insurance companies pared their A-share holdings this year as a way to reduce risk, and now allocate only 10 per cent of assets to buy stocks and mutual funds.
'The investment cap doesn't necessarily mean that insurers will spend as much as 20 per cent to buy stocks,' said Luo. 
'It's actually not necessary to raise the ceiling for stock investment now since they could still shell out another 400 billion yuan based on the existing portfolios.'
The Shanghai Composite Index has fallen 20 per cent this year.
Solid foundation
Analysts reckon 5 per cent of the mainland's insurance assets are in real estate, and these assets total, in yuan: 4.2tr yuan



Beijing widens route for insurance funds into infrastructure