On 7 April, the Insurance Association of China (hereinafter referred to as the "Insurance Association") issued a circular on the construction of investment management capacity of insurance group (holding) companies and insurance companies (hereinafter referred to as the "Circular").
The investment management capabilities of insurance companies include five capabilities: credit risk management, stock investment, equity investment, real estate investment and derivatives application management. Overall, compared with 2023, the scope of investment management capabilities of some insurance institutions has narrowed, or even disappeared from the list. However, only 33 insurance institutions have the qualifications for stock investment capabilities, which are highly concerned in the industry. According to industry experts, stock investment requires a professional investment team and a sound investment decision-making mechanism, and some insurance companies with smaller scale or weaker investment management capabilities may not be able to meet these conditions.
The investment capacity of some institutions has shrunk
Insurance investment has always been the focus of the market, and the investment capabilities and qualifications of various insurance companies have also attracted much attention from the market.
According to the "Circular" issued by the Insurance Association, as of March 31, 2024, there are 117 insurance companies in mainland China with a total of 266 investment management capabilities of various types, and in terms of the number of investment management capabilities, there is only one insurance company with five investment management capabilities: credit risk management, stock investment, equity investment, real estate investment and derivatives application management, which is Ping An Pension Insurance, and 16 insurance companies with four investment management capabilities.
As the main manager of 27 trillion yuan of insurance funds, the investment management capacity building of insurance companies is crucial. The reporter combed and found that among the insurance companies that announced their investment capabilities, there were 76 life insurance companies, while only 27 property insurance companies, which means that nearly seventy percent of property insurance companies do not have any investment management capabilities. Jiang Han, a senior researcher at Pangu Think Tank, told Beijing Business Daily that on the one hand, the business characteristics and profit models of property insurance companies are different from those of life insurance companies, and they pay more attention to short-term profits and risk control, so they may not invest enough in investment management capacity building. On the other hand, the size and strength of P&C insurers are uneven, and some small P&C insurers may find it difficult to make breakthroughs in investment management capabilities due to limited resources.
Although most life insurance companies have investment management capabilities, according to the list published in the Circular, the scope of investment management capabilities of life insurance companies will be narrowed in 2024. Specifically, in 2023, there will be a total of 80 life insurance companies with different types of investment management capabilities, which will be reduced to 76 in 2024. Among them, 5 companies "disappeared" from the "Circular", including Shanghai Life Insurance, Dingcheng Life Insurance, Huagui Life Insurance, etc., and 1 new institution was CPIC Health.
Taking Shanghai Life Insurance as an example, in 2023, the company has both credit risk and stock investment management capabilities, and in 2024, it will no longer have any investment management capabilities.
A reporter from Beijing Business Daily sent a letter to the above five companies for an interview on related issues, among them, Shanghai Life replied to the reporter that in recent years, under the guidance of the regulatory authorities and in accordance with the requirements of relevant laws and regulations, the company has focused on consolidating the infrastructure of investment capacity, improving the level of capital use management, and striving to make new progress in investment ability qualifications. Huagui Life Insurance said that the company has no information to reply to.
Regarding the changes in the investment management capabilities of various insurance companies, Jiang Han said that in the process of business adjustment or transformation, these institutions have taken the initiative to give up part of their investment management capabilities to better adapt to market changes and development needs. In addition, the adjustment of regulatory policies may also lead to the loss of the original investment capacity of some institutions.
Equity investment management capabilities are the most popular
The more investment management capabilities an insurance company has, the broader its investment scope. In the event that the five "all-rounds" cannot be realized, insurance companies will give priority to the layout of their most important investment directions.
So, which investment management capability do insurance companies value the most? The reporter combed and found that equity investment management ability has become the most common configuration among 117 insurance companies, with a total of 92 institutions having this ability, followed by credit risk management ability, and 75 insurance institutions have this management ability. In addition, 63 institutions have real estate investment management capabilities.
"The largest number of insurance companies with equity investment management capabilities reflects the importance that insurance companies attach to the equity market in their investment strategies. Li Wenzhong, deputy director of the Rural Insurance Research Institute of Capital University of Economics and Business, pointed out that the ability to have equity investment management is the need for insurance companies, especially insurance group companies, to optimize the layout of the financial market and insurance-related industries, and it can also bring higher returns to the company, of course, it is also accompanied by greater risks, reflecting the company's confidence in risk management.
At present, insurance capital has become the second largest institutional investor in the mainland A-share market, but the reporter found that only 33 insurance companies have stock investment management capabilities, including 1 insurance group company, 5 property insurance companies and 27 life insurance companies. In addition, compared with 2023, the number of insurance companies with stock investment management capabilities has decreased by 4.
Wang Zhaojiang, executive director of the Shenzhen Beishan Changcheng Fund Investment Research Institute, said that this is because stocks are, after all, investment varieties with high risk levels, with large price fluctuations and high liquidity, while insurance is a protective product, and more attention is paid to the safety, stability, and reliability of the product.
Li Wenzhong further analyzed that among the companies with stock investment management capabilities, the proportion of life insurance companies is higher than that of property insurance companies, which reflects that life insurance companies pay more attention to the construction of stock investment management capabilities. At present, the number of companies with equity investment management capabilities has decreased, which may be due to the high volatility of the stock market and the more cautious investment strategies of some insurers.
How to be "all-rounder"
As one of the two wheels that drive an insurance company forward, investment ability is related to the survival and development of an insurance company. Especially in the current context, with the downward trend of interest rates, the competition in the insurance industry in the future will gradually concentrate on the competition of investment ability. This undoubtedly puts forward higher requirements for the investment management capabilities of insurance companies.
Jiang Han said that first of all, insurance companies need to strengthen the construction of investment teams, improve investment professional capabilities, and ensure that they can make timely and accurate judgments on market changes. Second, it is necessary to improve the investment decision-making mechanism and establish a scientific and effective risk management system to ensure the soundness and compliance of investment decisions. In addition, we can strengthen cooperation with other financial institutions to jointly develop new products and services to meet the diverse needs of customers.
"This mainly depends on the operational ability and asset management ability of the insurance institution, the operational ability determines its own operating efficiency, and the asset management ability determines the sustainable development ability. Wang Zhaojiang concluded.
Beijing Business Daily reporter Li Xiumei
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