Recruiting in China

INSURERS are improving profitability as investment vehicles increase.

The investment returns for the country's insurers sat at 5.8 percent last year, up 2.2 percentage points from 2005. It marked a three-year high.

Total profit for the industry topped 95.5 billion yuan (US$11.94 billion) last year, according to the China Insurance Regulatory Commission.

The top insurance regulator is considering further expansion of the investment channels insurers can utilize.

"The watchdog is researching the possibility of expanding the upper limit of insurers' investments in the stock market," said an official with the commission who asked not to be named.

Domestic insurers were formerly restricted to bank deposits and bonds as main choices. The low returns made it difficult to boost profit.

At present, insurers are allowed to invest up to five percent of their total assets in the stock market. However, the watchdog is also concerned that the strict limit curbs insurers' investment returns from the stock market, especially now that has entered a period of strong gains.

China's stock market stepped out of a five-year low last year as the Shanghai Composite Index surged 130 percent. It is expected the bull run will continue for another two years, according to analysts.

Insurers can now invest in stocks, infrastructure and overseas fixed income markets. Insurers invested US$2.46 billion overseas last year while 10 billion yuan alone was invested in the high-speed railway linking Shanghai and Beijing.

Insurers are making money from investments in the banking sector. Last year, insurers bought stakes in Industrial and Commercial Bank of China and Bank of China. Both banks' shares have surged since their debut in Hong Kong and Shanghai.

Authorities are considering giving insurers more options to invest abroad by allowing them to invest up to 15 percent of total assets in overseas markets including stocks, funds, fixed-return products, options, deposits, bonds, commercial bills and other products allowed by the regulator, the top regulator said.

It has been soliciting public opinion on the plan in a draft rule posted in December. More moves are also under way.

Shanghai will test using insurance capital to build apartments in Pudong New Area on a trial basis, the Shanghai Bureau of the CIRC said last week.

"I am expecting wider investment vehicles which will make my job more challenging and exciting," said Xiao Hua, an official within the investment department of a local insurer. "And I see the trend coming quicker these days."