Leverage Long-Term Insurance Funds for Long-Term Investments
The People's Bank of China announced on October 10th that in order to implement the requirements of the Third Plenary Session of the 20th Central Committee of the Communist Party regarding "establishing a long-term mechanism to enhance the inherent stability of the capital market," and to promote the healthy and stable development of the capital market, the People's Bank of China has decided to create the "Securities, Fund, and Insurance Company Swap Facility (SFISF)." This initiative supports eligible securities, fund, and insurance companies to use bonds, stock ETFs, and constituents of the Shanghai-Shenzhen 300 Index as collateral to exchange for high-grade liquid assets such as government bonds and central bank bills from the People's Bank of China. The initial operation scale is 500 billion yuan, and the scale may be further expanded depending on the situation. Starting today, applications from eligible securities, fund, and insurance companies will be accepted.
Several industry insiders, in interviews with journalists, stated that the SFISF plays an important role in promoting medium and long-term capital entering the market, maintaining the stability of the capital market, and promoting high-quality development of the capital market. Insurance funds inherently have the characteristics of "long cycle, high stability, and large scale." As important institutional investors in the capital market, they have long played a crucial role as a "ballast stone" and "stabilizer." The creation of the SFISF provides a new way for insurance institutions to efficiently utilize existing assets, which is conducive to enhancing the strategic determination of medium and long-term allocation of insurance funds and improving the ability of insurance funds to allocate stock assets. This, in turn, promotes high-quality development of the capital market while enhancing the ability of insurance funds to obtain medium and long-term stable returns.
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At the beginning of September, the State Council issued "Several Opinions on Strengthening Supervision, Preventing Risks, and Promoting High-Quality Development of the Insurance Industry," which proposed to leverage the long-term investment advantages of insurance funds. It aims to cultivate genuine patient capital and promote a virtuous cycle of funds, capital, and assets. Data from the National Financial Regulatory Administration shows that as of the end of August this year, the balance of insurance fund utilization was 31.8 trillion yuan, a year-on-year increase of 10.4%. Insurance funds allocated more than 21 trillion yuan to various fixed-income assets such as bonds and bank deposits, and invested more than 6 trillion yuan in equity assets such as stocks, securities investment funds, and unlisted corporate equity.
A person in charge of an asset company under China Life Insurance Group stated that it is necessary to combine the actual situation of the institution itself and flexibly use swap convenience tools to improve the efficiency of insurance fund utilization. As an insurance asset management institution, it is necessary to develop investment and financing strategies that meet its own characteristics and requirements, based on its actual situation in terms of asset-liability structure, solvency constraints, medium and long-term allocation strategies, stability of returns, and equity allocation ratios. By flexibly using swap convenience tools, it can "activate existing stocks and make good use of increments," thereby improving the efficiency of insurance fund utilization and enhancing the ability of insurance funds to serve the real economy.
A person in charge of China People's Insurance Asset Management Co., Ltd. stated that the swap convenience tool helps to build a safe, standardized, transparent, open, vibrant, and resilient capital market, and is one of the strong measures of financial regulatory authorities to enhance the long-term mechanism for the inherent stability of the capital market. As an institutional investor, it should enhance strategic determination, increase investment in directions that align with national strategies, and effectively enhance the role of insurance funds in supporting the high-quality development of the real economy and the capital market. In line with the actual situation of insurance funds, while achieving the long-term absolute return investment goals of insurance companies, it is necessary to develop investment and financing strategies that adapt to their own needs and market environment, flexibly apply swap convenience tools, improve the efficiency of fund use, and achieve the goal of "activating existing resources and optimizing new allocations."
At a recent policy briefing held by the State Council Information Office, Luo Yanjun, Director of the Life Insurance Supervision Department of the Financial Regulatory Administration, stated that the investment methods of insurance funds are diverse, including bonds, stocks, securities investment funds, insurance asset management products, trust plans, unlisted corporate equity, and public infrastructure securities investment funds. In terms of serving major national strategies, the registration scale of insurance asset management products and insurance private equity funds supporting the development of the Yangtze River Economic Belt exceeds 1.7 trillion yuan, the scale supporting the coordinated development of Beijing-Tianjin-Hebei is nearly 750 billion yuan, and the registration scale of products supporting the construction of the Guangdong-Hong Kong-Macao Greater Bay Area exceeds 430 billion yuan. In terms of supporting scientific and technological innovation, insurance funds have invested more than 600 billion yuan in technology companies through listed company stocks, direct equity investments, venture capital funds, and private equity funds.