Report: Chinese insurers want access to private equity

The chairman of China’s largest life insurer wants the government to allow insurers to make private equity-style investments as well as invest in private equity funds.

The chairman of China’s largest life insurer, China Life, has asked the Chinese People’s Political Consultative Conference to allow insurers to invest in private equity funds and make private equity-style investments, according to state-run publication The China Daily.

Access to the asset class would allow insurers to spread risk and more closely match the time horizons of their investments with their liabilities, said the chairman, Yang Chao.

Yang submitted his proposal to China’s top political advisory body during its annual conference in Beijing this week.

“An insurance industry investment fund, led by several big insurance companies, could be set up to propel their investment into quality unlisted companies and infrastructure projects,” Yang said in the proposal.

The Chinese government has eased the investment restrictions on insurers in recent years. Currently insurers are allowed to invest up to 20 percent of their assets in equities. But Yang said in his proposals that rapidly rising stock prices pose make those investments risky.

Chinese banks and securities firms have also asked the state to allow them to launch private equity funds. If they are successful, insurance companies could have an indirect conduit to the asset class: In January, the China Banking Regulatory Commission and the China Insurance Regulatory Commission signed a memorandum of understanding, formally allowing banks and insurance companies to invest in each other.

Many state-owned enterprises are also looking to make commitments to private equity funds, as well as co-invest alongside private equity investors. In addition, China’s $61.5 billion National Social Security Fund is also rumoured to be in talks to buy stakes in The Carlyle Group,  Kohlberg Kravis Roberts and TPG.

The Communist Party of China has also taken steps recently to foster the development of a domestic private equity industry, approving six locally run private equity funds last year. Two of the funds, including a $2 billion fund established in partnership with Singapore’s sovereign wealth fund Temasek Holdings, will be run by Goldman Sachs Gao Hua Securities chairman Fang Fenglei.