The China Insurance Regulatory Commission (CIRC) has published risk prevention guidelines for the management of insurance funds by both insurance firms and their asset management subsidiaries.

The guidelines, which stress both practicability and creativity, require insurance firms and insurance asset management companies to establish risk prevention systems for their rapidly growing indemnity funds.

The guidelines follow reports earlier this year that the government has decided to allow insurance firms to trade stocks directly to boost their repayment capacity.

Chinese insurance companies are allowed to invest their growing premium incomes only in bank deposits, treasury bonds, policy bank bonds and some corporate bonds, which many believe restrains their profitability and undermines their ability to settle claims.

Late last month, the commission published long-awaited regulations on insurance asset management companies, clarifying their establishment requirements and business scope.

But the regulations did not touch on whether or when the companies could trade stocks directly, circumscribing their investment scope as treasury bonds, financial bonds - mainly those issued by policy banks - and "other channels authorized by the State Council."

China's two largest State-owned insurers - the People's Insurance Co of China and China Life Insurance Co - established the nation's first insurance asset management firms last year as part of their reform schemes that culminated in overseas initial public offerings.

(China Daily May 10, 2004)