BOC Group Life Assurance is planning to use any QFII allocation it receives to develop the first renminbi-denominated investment-linked assurance scheme (ILAS) product in Hong Kong.

It comes after the company was one of four to receive a qualified foreign institutional investor (QFII) licence from the China Securities Regulatory Commission, as announced yesterday.

The other three were Hall Capital Partners (USA), Board of Regents of The University of Texas System (USA) and Nan Shan Life Insurance (Taiwan).

BOC Group Life Assurance (Hong Kong) had its licence application approved on July 12, while the others were rubber-stamped on August 6.  

Choy Chungfoo, chief executive of BOC Group Life Assurance, told the Hong Kong Economic Times of his hopes that the first renminbi ILAS product would be available for Hong Kong investors at the start of next year, pending its receipt of a QFII quota.

Several insurance firms in Hong Kong are eager to develop such a product given the pace of liberalisation of the Chinese currency, with most ILAS funds denominated in US and HK dollars, as well as a few in Australian dollars and euro.

Given the fact that ILAS products come under different regulators, the birth of RMB-denominated products has taken a long time.

AsianInvestor knows of at least one large international insurer that planned to develop an RMB-denominated ILAS product two years ago but was turned down by the SFC and urged to seek approval from other regulators. 

When it comes to regulation, the manufacture of ILAS products is approved by the SFC; but distribution is covered by the HKMA when sold through banking channels and the Office of the Commissioner of Insurance when it comes to brokers and agency force.

Separately, Nanshan becomes the eighth Taiwanese life insurer to get a QFII licence, after China Life, Shin Kong, Taiwan Life, Mercuries Life, TransGlobe Life, Cathay Life and Fubon Life

On the back of warming cross-strait ties with mainland China and closer integration between financial institutions on both sides, Taiwanese insurers are increasingly seeking to tap China’s markets, spurred by low domestic government bonds yields (below 1% for a five-year tenor).

“Even though the performance of the stock market in mainland China hasn’t been satisfying recently [down -13.3% since May 7], we are optimistic that China will continue to record prudent economic growth,” says Hsu Miao-chiu, CFO at Nanshan Life Insurance. “We will invest in equity and bond markets at appropriate times to boost long-term investment returns.”

China’s securities regulator CSRC has approved 41 foreign institutions for QFII licences to date this year, 23% of the overall number of QFIIs (176) and faster than at any time since the scheme was introduced in 2003.

Last year a total of 29 foreign financial institutions received QFII approval, from 13 in 2010 and 19 in 2009 following a crackdown in the wake of the global financial crisis.

The State Administration of Foreign Exchange (Safe) has also quickened the approvals process for granting quotas. Year to date, 38 QFIIs have won a total of $4.63 billion in quotas, while 10 QFIIs have been granted additional quota of $1.42 billion (just three have had their $155 million worth of quotas revoked). As at July 20, Safe has granted a total of $28.53 billion to 147 QFIIs.

Chinese regulators have pledged to maintain the pace of opening China's financial markets through the QFII scheme as part of RMB liberalisation.

The CSRC announced a set of deregulation measures last month to lower the threshold for foreign financial institutions to invest in China’s onshore market, and it granted greater flexibility in investment and operations.

For more details on ILAS products in Hong Kong, please see AsianInvestor magazine's forthcoming September issue.