CIRC gives nod to brokerages

The China Insurance Regulatory Commission (CIRC) has issued its first batch of licenses to nine domestic financial firms to manage insurers' investments, according to a statement from the regulator issued late Wednesday, a move which experts told the Global Times underlines a growing need to address insurers' low investment returns and asset depreciation.

The CIRC first announced on July 23 that it would allow local insurance companies to contract securities firms or fund management companies as third parties to handle their investments, an arrangement commonly seen in most well-developed insurance markets.

In the past, Chinese financial regulators kept a tight rein on how insurance companies invested their capital given how closely tied the financial performances of these companies were to people's daily lives, Xu Meifang, an insurance researcher from the Shanghai Academy of Social Sciences, told the Global Times. It was long believed that the best way to minimize risk would be to make insurers establish their own asset management units, Xu explained.

Since most local insurance companies, especially smaller industry figures, lacked both the professional expertise and the independent decision-making capabilities needed to maximize returns on their company's investments, most insurers suffered financially from this strategy, said Xu.

The annual investment return rate of Chinese insurers was only 3.6 percent last year, down from 6.41 percent in 2009, Xiang Junbo, chairman of the CIRC, said early this year.

But while investment yields sag, the assets of insurers' continue to enlarge. The total assets of the domestic insurance sector amounted to 6.64 trillion yuan ($1.053 trillion) as of the end of August, up 17.73 percent year-on-year, CIRC data show.

With so much space available to improve their investment efficiency, insurers are extremely eager to partner with skilled asset managers and institutional investors who know how to leverage large capital sums in the financial market, Xu added.