Hong Kong: China Issues New Rules On Investments By Insurers

Last Updated: 27 August 2010
Article by Stuart Valentine and Katherine Lian

The China Insurance Regulatory Commission (CIRC) recently released a set of "Interim Measures on the Utilisation of Insurance Funds" (Measures), setting out modified rules on permitted investments by insurance companies in China, effective from 31 August 2010.

In particular, these Measures specify, for the first time, the ratio of insurance funds that may be invested into real estate, shares of unlisted companies and unsecured bonds and debt instruments.

Following the release of these Measures, CIRC also released a "Notice on the Modification of Insurance Fund Investment Policies" (Notice 66) on 11 August, providing further details on insurers' permitted investment channels and ratios.

Details of the permitted investment ratios are set out in the tables below.

Who do the Measures apply to?

The Measures apply to insurance holding companies, insurance companies and insurance asset management companies established in China.

We note that the Measures make no distinction between foreign-invested and domestic insurance companies, and re-insurance companies are not mentioned in the Measures. However, it is our view that the use of insurance funds by such companies must comply with these Measures.

"Insurance funds"

The "insurance funds" referred to in the Measures comprise insurers':

  • capital funds;
  • social welfare funds;
  • undistributed profits;
  • reserve funds; and
  • other funds.

Permitted investment channels

There are 3 major channels in which insurers are permitted to invest their insurance funds into, and a broad category of specifically approved investments:

  • bank deposits;
  • bonds, shares and securities investment funds;
  • real estate; and
  • other channels permitted by the State Council (which currently include infrastructure and central bank bills).

Permitted investment ratios

The Measures limit the amount of an insurer's insurance funds that may be invested in any particular type of permitted investment. These ratios are set out in the first table below.

Unless otherwise noted, the ratios set out in the tables below are measured using the "book balance of the total value of the investments concerned" against the "amount of the particular insurer's total assets at the end of the preceding quarter".

  Type of Investment Permitted Investment Ratio
(1) bank call deposits, government bonds, central bank bills, policy bank bonds and funds such as money market funds not less than 5%
(2) unsecured corporate bonds and non-financial corporate debt financing instruments not more than 20%
(3) shares and funds of an equity nature not more than 20%
(4) (a) shareholding interests in unlisted companies not more than 5%
  (b) financial products related to shareholding interests in unlisted companies not more than 4%
  (c ) (a) + (b) not more than 5%
(5) (a) real estate not more than 10%
  (b) real estate related financial products not more than 3%
  (c) (a) + (b) not more than 10%
(6) infrastructure related to debt investment schemes not more than 10%

In addition, the Measures provide that:

  • any direct investment by insurers into the development of real estate projects is prohibited. Therefore, it seems that real estate investment by insurers may only be made by way of investment into existing real estate projects and real estate related financial products;
  • for the calculations in (1) to (6) above, total assets exclude the outstanding amount of bond repurchase agreements, investment-linked insurance products, and non-life assurance type of variable return insurance investment products;
  • the total assets of insurance holding companies refers to the total assets of the group parent company; and
  • the cumulative cost of investment in shareholding interests by insurers must not exceed their net asset value.

The table below sets out the further ratios imposed by Notice 66.

  Type of Investment   Permitted Investment Ratio
(7) Shares any single listed company shares not more than 10% of the total share capital of the company (NB. 1)
(8) Securities investment funds any single securities investment funds not more than 3%
    securities investment funds (in total) not more than 15%
    securities investment funds and shares not more than 25% (NB. 2)
    any single close-end fund no more than 10% of the fund's issued value
(9) Bonds any single bond listed below:
  • commercial bank financial bond
  • commercial bank subordinated bond
  • commercial bank subordinated term debts
  • international development institution RMB bond
  • secured enterprise (corporate) bond
not more than 20% of the bond's issued value
    any single unsecured bond not more than 10% of the bond's issued value
    secured and unsecured bonds (NB. 3)  
  • bonds issued by the same issuer
not more than 20% of the issuer's net asset value at the preceding accounting year
  • bonds issued by related/affiliate companies
not more than 20%
(10) overseas investments (NB. 4) - not more than 15%
(11) any single investee legal entity -

not more than 20%; and

not more than 50% of the investee legal entity's net asset value at the preceding accounting year


  1. Investment over 10% will only be allowed for acquisition of a controlling interest.
  2. Insurers may invest up to 25% of their insurance funds into shares and securities investment funds. This means that an insurer may invest 20% of their insurance funds into shares and funds of an equity nature, as stipulated by the Measures, while investing another 5% into other securities investment funds.
  3. Insurers that belong to the same insurance holding company may not invest, in total, more than 60% of the issued value of the same series of bonds (whether secured or unsecured).
  4. Overseas investments include publically issued bonds and securities investment funds, as well as publically listed shares. Insurers' investments into the Hong Kong market are limited to i) shares listed on the Main Board of the Hong Kong Stock Exchange, and ii) bonds issued in Hong Kong by Main Board listed companies and large Chinese state-owned enterprises.

Prohibited investments

The Measures also set out a list of investments that insurers are prohibited from making, which include:

  • depositing insurance funds into non-banking financial institutions;
  • any direct investment into the development of real estate;
  • venture capital investment;
  • purchasing shares that a stock exchange has identified as "having the potential to be de-listed" or "requiring special treatment";
  • investing in shareholding interests or real estate that have no prospects for a stable cash return or capital gain, or are in a high-polluting industry;
  • providing guarantees or granting loans (with the exception of granting personal policy loans); and
  • any other investments that may otherwise be prohibited by CIRC.

For more information on these Measures or to obtain an English translation, please contact one of the Mallesons team members listed in this Alert.

We also provide links to the Chinese text of these Measures and Notice 66.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions