China's regulators plan to allow mainland insurers to broaden their investments into areas such as asset-backed securities and infrastructure projects, sources close to the situation said recently.
Chinese insurers held over 1 trillion yuan ($124 billion) in assets by the first half of 2005, according to official data, but the companies are mostly limited to investing in low-yielding government bonds and savings accounts.
The domestic industry, along with the big number of global players operating on the mainland, has lobbied Beijing to relax investment limits so they can chase higher returns and help meet their huge longer-term obligations.
The China Insurance Regulatory Commission (CIRC) recently finished drafting the new rules lifting investment limits, which were circulated to several domestic large insurance companies for feedback, according to sources who had reviewed the drafts.
China Life Insurance Co, Ping An Insurance (Group) Co and China Pacific Insurance Co - the country's three biggest life insurers - were among the firms chosen to be experimental units on the new rules, said one source who works for one of the insurers.
"Beijing gave us the drafts last month and asked us for feedback," said the source, adding he expected the new rules to be launched as soon as next month.
Domestic insurers, who have only recently been able to invest in Chinese stocks, will be able to put their money in new asset-backed securities products and indirectly invest in Chinese infrastructure products, said another industry source in Shanghai who had studied the new rules.
"New rules require that investments on infrastructure projects such as subways, bridges or tunnels have to be made via a third party like a trust company," he said.
China Construction Bank is awaiting final approval to issue about $371 million of the country's first asset-backed securities product offered by a domestic lender.
Besides potential new investments on infrastructure and equity, regulators are also considering allowing some local insurers the right to trade in the country's fledgling financial derivatives markets, including forex risk hedging products, sources said.
"But such new investments will carry limits restricting insurers to only investing between 10 percent and 20 percent of their total assets," said the source with one of the top three insurers.
Life insurance premiums in China have reached a record 246 billion yuan ($30.4 billion) in the first eight months of the year, according to regulatory statistics.
Insurers are mostly limited to investing those premiums in domestic capital markets, with limits on how much they can put in to each type of asset class.
For example, each insurer is limited to investing up to 5 percent of total assets in China's stock market.
There has been some easing on overseas investments. Earlier this month, CIRC official Sun Jiayong told Reuters that all qualified insurers in China were now allowed to invest abroad "in principle".
China Life, the country's largest life insurer, was granted special permission to invest in Construction Bank's $8 billion initial public offering last month.