China’s insurers to expand asset management

china_mapChinese asset managers owned by insurance companies should be able to start pitching for third-party investment management business after China's insurance regulator issued a new set of guidelines.

At least eight more insurers, in addition to the current nine, will now qualify to launch a dedicated investment subsidiary, not only to expand their traditional role of managing internal capital but also to start raising third-party assets, says Z-Ben Advisors, a Shanghai-based asset management advisory firm.

Some insurer-owned asset managers already manage money for smaller insurance firms and certain pension plans. The guidelines formalise these activities.

China’s investable insurance assets are projected to reach Rmb 5.7 trillion (€601bn) by end-2011.

Many insurers have been actively lobbying China Insurance Regulatory Commission (Circ) to establish their own asset management businesses for years.

Last December, Circ approved Sino-Life Insurance to start preparatory work to establish the industry’s 10th manager.

Z-Ben says the investment scope and skill of the existing nine firms vary, with the top-tier firms such as China Life and Ping An boasting not only experience in traditional asset classes but also other alternative classes such as real estate, private equity and infrastructure investments, both domestically and abroad.

In addition, many asset managers tend to cooperate extensively with foreign managers, especially those in the alternative-investment space.

Insurers will have to increase their registered capital from Rmb 30m to Rmb 100m, and total net assets from Rmb 5bn to Rmb 10bn under the new Circ guidelines.

But the Circ’s lowering the requirement for firms to be in operation for at least eight years to five years means that most insurers will be accelerating their expansion plans.

Accordingly, at least five formal approvals are expected before year-end, says Z-Ben, with Hua An Property, Harvest Life, Union Life, Sunshine Insurance, CITIC-Prudential and Aviva-COFCO probably qualifying under the new guidelines.

In a separate development, the scope of Chinese fund managers is expanding internationally with the so-called mini-QFII project, which allows Chinese managers with Hong Kong subsidiaries to set up RMB-based funds and target Chinese currency offshore to invest in onshore capital markets.

©2011 funds europe