Domestic insurers plan to expand overseas through investment over the long term, but they should ensure they are prepared for global competition, a senior official said in Beijing on Friday.
The comments by Yuan Li, the spokesman for China's Insurance Regulatory Commission, followed the sector's first overseas purchase of a global financial institution.
Yuan also urged Chinese insurers to take full advantage of domestic opportunities.
On Thursday, Ping An announced that it had purchased 4.18 percent of Fortis for 1.81 billion euros, becoming the largest shareholder of the Belgium-based financial institution.
Fortis' market capitalization was 48.6 billion euros on October 31, making it one of the top 15 European financial institutions.
In another development, Yuan disclosed that the commission had provided an opinion letter to securities authorities on the listing plans of China Pacific Insurance, which will involve one billion yuan-denominated A-shares on the Shanghai bourse and no more than HK$900 million-denominated H-shares on Hong Kong stock market.
China Reinsurance Group, the country's largest reinsurer with a market share of 80 percent, might also list in the future, he said.
The spokesman said that 20 insurers had acquired qualified domestic institutional investor (QDII) status, and many have targeted the Hong Kong stock market.
Yuan declined to disclose the quotas for these insurers but confirmed that no limits had been set on their investment on the Hong Kong bourse. Another three insurers were under consideration for QDII status, he said, without giving further details.
To ease the pressure from China's massive foreign exchange reserves, China launched the QDII scheme last July, allowing mainland institutions and residents to invest overseas through mainland commercial banks. The program also allows insurance institutions to invest some of their assets in foreign fixed-income and money market instruments.
Yuan said that China's insurance market has grown solidly. Between January and October, premium income rose 24.2 percent year-on-year, to 583.54 billion yuan (US$79.07 billion).
From the time the Insurance Law was enacted in 1995 through the end of October this year, insurance companies had put 2.63 trillion yuan into capital markets. The 1995 law expanded insurers' investment options, which had previously been limited to bank deposits and government bonds.
Of the total invested to date, the biggest share of 41 percent or 1.07 trillion yuan went to bonds. Stocks, equities and funds accounted for 683.09 billion yuan, while bank deposits totaled 733.2 billion yuan.
Insurers' capital market investments were up 34.9 percent during the first 10 months of 2007. The insurance fund generated 242.185 billion yuan in operating proceeds during that period, registering an average yield of 10.87 percent, Yuan said.
Yuan played down the negative impact of rising interest rates on life insurance products. The one-year benchmark deposit rate had risen five times this year to 3.87 percent as of late September, well above the 2.5 percent fixed rate that life insurance products offer.
"The impact is not much overall. After all, life insurance products are not solely for investment, as bank deposits and equities are," he said.
He reaffirmed that regulators were still pondering an adjustment in the fixed interest rate for life insurance products.
(Xinhua News Agency November 30, 2007)
