Original title: Public REITs welcome long-term investors, China Banking and Insurance Regulatory Commission issued a document to regulate insurance capital investment
On November 17, the China Banking and Insurance Regulatory Commission issued the “Notice on Issues Concerning the Investment of Insurance Funds in Publicly Raised Infrastructure Securities Investment Funds” (hereinafter referred to as the “Notice”), agreeing to the investment of insurance funds in publicly offered infrastructure securities investment funds. The “Notice” clarifies the relevant regulatory requirements for public real estate investment trust funds (REITs) in the field of insurance capital investment in infrastructure from various aspects such as the qualifications of insurance institutions, investment target conditions, and risk management procedures.
The person in charge of the relevant department of the China Banking and Insurance Regulatory Commission stated that insurance funds have the characteristics of long term, large scale, and stable sources, which naturally meet the financing needs of infrastructure projects. As of the end of September 2021, insurance funds have invested a total of 3.31 trillion yuan in infrastructure areas such as transportation, energy, water conservancy, and shantytown renovation, providing financing support for projects under construction and major projects to make up for shortcomings. Infrastructure funds use infrastructure projects as the underlying assets. The project has a long operating cycle and compulsory dividends, which can better match the long-term allocation needs of insurance funds and provide new investment tools for insurance funds to participate in infrastructure construction.
The “Notice” pointed out that insurance group (holding) companies and insurance companies that invest in infrastructure funds on their own should have real estate investment management capabilities. The assessment result of asset and liability management capabilities in the most recent year should not be less than 80 points, and the comprehensive solvency at the end of the previous quarter was sufficient. The rate shall not be less than 150%. If insurance group (holding) companies and insurance companies entrust insurance asset management companies and other professional management institutions to invest in infrastructure funds, the assessment result of asset and liability management capability in the most recent year shall not be less than 60 points, and the comprehensive solvency adequacy ratio at the end of the previous quarter shall not be low Less than 120%. If an insurance asset management company is entrusted to manage insurance funds or invest in infrastructure funds through insurance asset management products, it shall have the ability to manage debt investment plans, and the company’s regulatory rating in the most recent year shall not be lower than Category C.
In terms of improving the risk management process, the “Notice” clarified that insurance institutions should improve their internal control systems, continue to strengthen risk management, and prevent the transfer of benefits.
In terms of strengthening active investment management, the “Notice” requires insurance institutions to conduct a comprehensive analysis and evaluation of the investment infrastructure fund holding projects, and regularly evaluate investment risks.
In terms of strengthening the requirements for supervision and management, the “Notice” pointed out that insurance institutions investing in infrastructure funds should regularly report on relevant investment conditions. In case of investment in violation of the “Notice”, the China Banking and Insurance Regulatory Commission will order corrections within a time limit and take regulatory measures or impose administrative penalties in accordance with the law.
The person in charge of the relevant department of the China Banking and Insurance Regulatory Commission stated that the “Notice” adheres to the direction of market-oriented reforms, and timely incorporates fund products with risk-return characteristics that meet the needs of insurance funds into the investment scope, diversifies investment risks, and helps to revitalize the stock of infrastructure assets; infrastructure funds are also available To open market equity products and real estate asset attributes, the “Notice” insists on penetrating supervision in accordance with the nature of the business; adheres to the principle of steady start, sets certain conditions for insurance institutions to participate in investment in infrastructure funds, and sets certain conditions in terms of investment capacity and regulatory rating to guide insurance Institutions carry out rational investment and long-term investment.