By Yuan Min, Wang Jianzhao , and Kirby Carder, King & Wood Insurance Department, Beijing Office

Last Sunday during a press conference held during the National People’s Congress, China Insurance Regulatory Commission (CIRC) Chairman Wu Dingfu announced that the CIRC is currently creating its policy for the use of insurance premium funds to invest government subsidized affordable housing projects. He specifically stated that China does not have a legal barrier to insurance companies investing insurance funds in affordable housing projects, and he also said that the CIRC plans making Shanghai the first city where this is possible. However, he cautioned that the main priority in insurance fund investment must still be risk management because any investments must provide a return so that an insurance company’s duty to pay its policyholders claims can be met.

The new version of the Insurance Law that came into force October 2009 made it clear that insurance companies would have more investment channels are open for insurance funds, specifically, the 2009 Insurance Law stated that investing insurance funds in real estate was acceptable. In September 2010, the CIRC promulgated the Provisional Measures for Insurance Capital Investment in Real Estate. This regulation provides the basic outline of what the types of real estate projects that insurance companies can invest in. Although this regulation is in place, it appears that the CIRC is not ready to approve insurance companies investing real estate projects, but announcement can probably be taken as evidence that CIRC is moving closer to being ready to approve insurance companies investing in real estate projects. Also based on Chairman Wu’s statements it probably can be assumed that the first real estate project that insurance company investing will be located in Shanghai, and it most likely be a housing project that is subsidized to keep its prices affordable.

If you have any questions about the potential for insurance funds to be invested in real estate development projects, or if you would like more details on the Provisional Measure for Insurance Capital Investment in Real Estate please contact us.

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