China’s Insurance Regulatory Commission (CIRC) has published detailed rules on how Chinese insurance companies can invest potentially billions of dollars into domestic private equity real estate funds for the first time.
According to the commission on Sunday, insurers are allowed to invest up to 10 percent of their assets in real estate and 5 percent in private equity, unleasing a fresh capital source to China-based RMB real estate and provate equity managers. It will not allow insurers to invest with foreign funds or cross-border investment vehicles.
Chinese insurers are estimated to have around $661 billion of assets, which means they could invest up to $66 billion in Chinese property as an asset class. However, the commisison has capped participation in real estate-related products such as funds to 3 percent of assets. It has also reportedly prevented insurance companies from investing in residential properties or directly participating in property development.
China is broadening insurers’ investment options to help improve their returns and aims to channel more of the country’s savings into the private sector to help sustain economic growth. The move is seen boosting the investment incomes of Chinese insurance companies such as China Life and Ping An in the long run.