The China Insurance Regulatory Commission (CIRC) has allowed three mid-ranking Chinese insurance firms to outsource investments to external asset managers. Great Wall Insurance will outsource its equity portfolio to Huatai Asset Management; Happy Life Insurance to Ping An Asset Management; and CCB-Cigna Life to a company yet to be determined.

Approvals were previously given to Pacific Antai Life Insurance, Sunshine Insurance, Anhua Agricultural Insurance and Allianz-China Life. These smaller players have not been allowed to invest directly into equities, however as they have yet to satisfy the CIRCÆs requirements of having an eight-year history and having more than Rmb10 billion ($1.43 billion) in assets.

The CIRC imposes a maximum 10% direct equity exposure of total assets for mainland insurers. It has not said if there is an overall quota applied to these outsourcing arrangements.

Peter Alexander, a principal at Z-Ben Advisors, says the direct equity exposure limit excludes QDII portfolio investments. He notes that many asset managers are expecting a windfall from assets of insurance companies even if many are still clueless about how the outsourcing will take shape.

According to Z-Ben Advisors, the domestic fund industry has seen a five-fold increase in fee income to Rmb28.2 billion ($4.03 billion) from Rmb5.7 billion ($820 million) last year. Despite competition from foreign fund management companies, local managers have a greater share of the fee income at Rmb16.1 billion ($2.3 billion).