Regulator tightens investment rules for insurance firms

China on Friday said new rules governing insurers' investments will come into force on April 1, and the same will focus on governing the way funds are invested by insurers and on improving risk control.

The new rules are expected to improve the regulations that are in line with the central government's efforts to prevent financial risks in the insurance sector, according to Jia Biao, deputy head of the capital operation department of China Insurance Regulatory Commission, the country's insurance regulator.

According to the new rules, all overseas investments made by the country's insurers must be made according to rules set by the central bank and the foreign exchange regulator, both of whom had issued guidelines to enhance scrutiny of overseas investment since 2016.

Starting late 2016, irrational investment behavior such as investment in risky overseas projects has led to huge capital outflows and triggered regulatory concerns.

Shareholders will not be allowed to interfere in the operation of insurance funds. At the same time, insurance funds must only be managed by registered firms and channel entities are not allowed to step in, according to the guidelines.

While enhancing regulation, the regulator will also strive to further improve returns, Jia said.

The average investment return of insurance funds remains at proper levels, he said, adding that fixed income accounts for a substantial proportion of the investment structure, ensuring a stable source of investment revenue.

By the end of 2017, total insurance assets increased to 16.75 trillion yuan ($ 2.63 trillion), up by 10.8 percent year-on-year compared to the same period in 2016. Investment revenues stood at 83.52 billion yuan by the end of 2017, with 70 percent coming from fixed income investment.