Insurance AMCs and Risk Control Guidelines: New Rules Aim to Meet Industry Demand

By Stuart Valentine and Ben Leung, Clifford Chance, Hong Kong

Premium income of insurance companies in China has been increasing at a rate of more than 25% annually in recent years, with total annual premium income reaching nearly Rmb1 trillion as of the end of 2003. This strong growth has resulted in heavy pressure on Chinese insurance companies to control their investment risks and to achieve better yields. Most insurance companies manage their assets through their internal asset management departments. To date, we are aware of only two Chinese domestic insurance companies, PICC Property & Casualty and China Life, that have obtained licences to set up their own specialized insurance asset management companies (Insurance AMCs). As the insurance industry expands rapidly with higher investment volume and more diversified portfolios, there is an increasing demand for the establishment of specialized Insurance AMCs to ensure proper management of insurance funds by professional institutions.