The China Insurance Regulatory Commission (CIRC) said it has no plan to cut insurers' stock investment caps despite worries about a stock market bubble.

Chinese insurers can decide for themselves how much to invest in stock markets, as long as they stay under a fixed ceiling, the insurance regulator said on Friday.

"We will not intervene," CIRC spokesman Yuan Li said at a press conference. "There is much room for insurers to flexibly adjust their portfolios in line with their investment capacity and risk-control ability."

According to the regulations, Chinese insurers can invest up to 10 percent of their assets directly in stocks and 15 percent in mutual funds.

Chinese insurers had invested 6.8 percent of their assets in mutual funds by the end of June, and 9.8 percent in stocks, the CIRC said. The allocations were up from 5.4 percent and 7.9 percent, respectively, at the beginning of the year.

The Chinese stock market has surged about 85 percent this year, making it the second best-performing market in the world. With the rebound of A-share market, the insurers retrieved the fervor of stock investment, especially in the second quarter.

Latest statistics from the CIRC showed that, the insurers injected 154.8 billion yuan (US$22.66 billion) to invest on the A-share stock market in the first half and 75 percent of the capital was invested in the second quarter.

The CIRC also said the insurance sectors' capability on business development and risk-control has been much improved.

In the first half, the insurers' revenue was 598.61 billion yuan, up 6.6 percent year-on-year. Insurers' assets totaled 3.7 trillion yuan, up 10.9 percent from six months earlier. By the end of June, the total net assets of the sector reached 329.9 billion yuan, up 17.5 percent since the beginning of the year.

Industry analysts said the insurers' investment portfolio could be solid, since fixed investment occupied over half of it.

In the first half, the sector's return on investment was about 3.44 percent. Fixed-income investment contributed 56.08 billion yuan, occupying 51 percent of total investment returns, while the returns from equity investment contributed 47.8 percent of the total.

According to the spokesman, the CIRC was considering enlarging the investment channels of the insurers and working on detailed rules for their investment in property market.

"We are working on relevant regulations for real estate investment and also expect to release it soon. (But), we should do deep research and prepare proper rules to better control the risks," said Yuan.

(China Daily August 1, 2009)