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 CBIRC to Eliminate Industrial Restrictions on the Financial Equity Investments with Insurance Funds
Category:Legislative Updates  
Keywords:insurance funds;  investment
Publish Date:11-20-2020
On November 12, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Notice on Matters Concerning Financial Equity Investment with Insurance Funds.
First, the Notice clarifies the concept of financial equity investment. A financial equity investment means that an insurance institution and its affiliates have no control or exercise joint control over the investee. Second, the restrictions are lifted on the industries where insurance institutions are entitled to make financial equity investments, such as the insurance enterprises, non-insurance financial enterprises, elderly care enterprises, medical enterprises and other enterprises related to the insurance industry. The insurance institutions now have more choices to conduct financial equity investments in a broader scope of industries. Third, the negative list for financial equity investments is to be made to prohibit insurance funds from entering enterprises in ten specific conditions, while at the same time encouraging the market-oriented and law-based debt-to-equity swaps. Fourth, the nature of funds is clearly defined. Insurance institutions are allowed to make financial equity investments with their own capital and liability reserve funds. Fifth, risks control is strengthened. The Notice urges insurance institutions to undertake the principal responsibilities for financial equity investments, improve the management system of equity investments, and strengthen the building of equity investment management capacity to make prudential investments, but not to take advantage of equity investments to carry out insider trading or transfer benefits. Sixth, supervision and administration should be strengthened. Insurance institutions making financial equity investments should perform the obligation of reporting. If the investment is carried out in violation of rules, the CBIRC will take regulatory measures or impose corresponding administrative penalties in accordance with law.
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