More insurers have been approved to invest overseas in a move that is expected to curb excess liquidity and reduce foreign exchange reserve pressure.

Twenty insurance companies have been granted qualified domestic institutional investor (QDII) licenses, the China Insurance Regulatory Commission (CIRC) said on Friday.

"The insurers will be allowed to use purchased foreign currencies to invest in stocks on the Hong Kong stock exchange," said Yuan Li, assistant chairman of the CIRC.

The insurers approved for the QDII scheme include China Life Insurance Co, Ping An Insurance (Group) Co, PICC Property and Casualty Co and China Reinsurance Co. A further three companies have applied to the CIRC for QDII licenses, Yuan said.

Investment in H shares by mainland insurers is expected to help the country curb excess liquidity and reduce its foreign exchange reserve.

Overseas investment by insurers will lead to greater capital outflows, which will ease the nation's excess liquidity situation, analysts said.

They also said it will increase cash outflows to overseas markets and, with a relatively cheap valuation, Hong Kong's H shares could become more attractive than A shares.

"There will be no cap for domestic insurers on how much they can invest overseas under the QDII program," Yuan said on Friday. But he didn't reveal the foreign currency quotas for insurers decided by the State Administration of Foreign Exchange.

Offshore investment by insurers is also likely to help accelerate valuation convergence between the mainland and Hong Kong equity markets.

But some analysts said QDII products could lack appeal as the yuan grows in value against the greenback and given their limited returns.

They said the move would help to diversify domestic insurers' investment options and risk management.

Insurance companies are also being encouraged to make overseas acquisitions, according to the regulator.

Ping An Insurance (Group) Co said on Thursday it had bought a 4.2 percent stake in Fortis, Belgium's biggest financial-services company, for $2.7 billion.

The country's insurers took 583.54 billion yuan in insurance fees in the first 10 months, a 24.2 percent year-on-year increase, according to the CIRC.

The regulator said insurers' fee income from property, life and casualty insurance was 16.9 billion yuan, 36.7 billion yuan and 16.5 billion yuan in the first 10 months - an increase of 34.3 percent, 22.5 percent and 17.5 percent.

(China Daily 12/01/2007 page10)