The State Council, China's Cabinet, has allowed commercial banks to buy into insurers, the insurance regulator said.

The China Banking Regulatory Commission and the China Insurance Regulatory Commission have signed a memorandum of understanding on regulatory cooperation, said Yuan Li, assistant chairman of the CIRC yesterday in Beijing. More details will be made available soon, he said.

Commercial banks previously were not allowed to invest in the insurance industry. But after the green light was given recently, Shanghai-based Bank of Communications, or BoCom, is planning to buy 51 percent of China Life-CMG Life Assurance Co from China Life Insurance Co. The country's fifth biggest lender is likely to be the first bank to invest in the insurance industry.

Qian Wenhui, vice president of BoCom, said on Tuesday that the bank is very keen to build itself into a comprehensive financial entity, with businesses in banking, asset management, trust, insurance and brokerage. China's insurers are estimated to earn a combined profit of 8.58 billion yuan (US$1.26 billion) in the first quarter, a year-on-year growth of 79 percent, Yuan said.

Investment by insurers in equities gained 19 percent in the first quarter to 288.6 billion yuan by the end of March. Equities investment accounted for 9 percent of insurers' investment pool, up 1 percentage point from the start of the year. Investment in funds dipped 0.4 percentage point to 5 percent. Banking deposits took up 31.1 percent, up 4.6 percentage points in the period.

Insurers made total investment of 3.2 trillion yuan by the end of March, a rise of 5.3 percent in the first three months.

Total premiums in the first quarter expanded 10 percent from a year earlier to 327.6 billion yuan.

(Shanghai Daily April 30, 2009)