The insurance regulator said on Tuesday it has received applications from the country's four major banks to invest in insurance companies and is now working on the related rules with the banking regulator.

"We have received applications from Industrial and Commercial Bank of China, China Construction Bank, Bank of Communications and Bank of Beijing to buy stakes in insurers," Yuan Li, spokesman for the China Insurance Regulatory Commission, said at a quarterly briefing in Beijing, adding that the regulator will submit these to the State Council after consideration.

Yuan also said that China Insurance Protection Fund Company would be set up after completing the legal process. And the fund would transfer its 30.55 percent stake in New China Life Insurance at the right time.

"The preparation work is going smoothly, and the regulator is revising the management rules on the insurance protection fund," said Yuan.

Industry statistics show that by the end of last year, the scale of the fund had exceeded 10 billion yuan. In August 2007, the fund acquired 366.65 million shares of New China Life Insurance for 2.2 billion yuan, becoming the insurer's largest shareholder.

Meanwhile, to boost insurers' investment return, especially under a sluggish stock market, the regulator has cautiously allowed insurers to diversify their investment portfolios.

"We will gradually widen the pilot program for insurance companies' investment in infrastructure projects and further expand their overseas investment," Yuan said.

He added that the regulator's capital operating department is now working on the management rules for insurers' investment in infrastructure projects, but he declined to reveal the details.

Sources said earlier this month that authorities might allow some insurers to invest up to 8 percent of their assets in infrastructure projects so they can diversify out of shares and bonds.

Given the industry's more than 3 trillion yuan total assets, there might be 240 billion yuan flowing into the infrastructure sector.

"For most insurance companies, around 80 percent of premiums still went to bonds and bank deposits, which could hardly ensure a satisfactory investment return," said a head of a joint venture insurer's investment department. "Since infrastructure investment could bring in steady income in the long term, it is a perfect match for insurers' assets."

According to the regulator, insurance companies earned 64.87 billion yuan on their investments in the first six months, with 10.7 percent of their assets put into equities and 53.6 percent into bonds at the end of June, compared with 17.7 percent and 44 percent respectively by the end of 2007.

Meanwhile, due to the sluggish stock market, bank deposits accounted for 25.8 percent of insurers' assets at the end of June, up from 24.4 percent at the end of 2007. The share of mutual funds fell to 6.9 percent, from 9.5 percent. The Shanghai stock market fell about 48 percent in the first half of the year, dragging down the share of equities.

"We will also have a close eye on new investment channels and products." Yuan said, adding that the regulator expects insurers to have stable investment returns in the second half.

The payouts for natural disasters in the first half of the year is expected to exceed 10 billion yuan. As of the end of June, payments related to snowstorms earlier this year surpassed 5 billion yuan, while those for May's Wenchuan earthquake stood at about 520 million yuan, the regulator said.

The industry's assets totaled 3.02 trillion yuan at the end of the second quarter. And the premiums over the same period surged 51.8 percent to 561.8 billion yuan.

(China Daily July 30, 2008)