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    CBIRC Notice on Insurance Fund Investment in Collective Trust Funds

    July 01, 2019

    CBIRC has amended the "Notice of Issues concerning the Insurance Fund Investment in Collective Trust Funds." The notice is intended to strengthen administration of investments in collective trust funds by insurance institutions, regulate investor behavior, and prevent investment risks of insurance funds. This notice shall come into force from the date of issuance.

    The notice will expand the cooperation between insurance institutions and trust companies and help create a level playing field for both parties. It clarifies the supervisory objectives of preventing the use of trust as shadow bank channels and avoiding the embedded complex structures to cap non-compliant investments. It also clarifies the scope for the underlying asset investment, which helps insurance institutions to take advantage of the expertise of trust companies in non-standard assets to enable insurance funds to better serve the real economy. The notice also applies the principle of “non-retroactivity” to ensure sufficient liquidity for relevant institutions, along with a stable market transition.

    The revised notice contains 19 articles, out of which certain articles have been either retained or modified from the earlier notice and some articles have been added to the new notice. The new notice retains requirements related to the decision making and authorization mechanism of insurance institutions investing in trust funds, qualification of professional responsible persons, scope of underlying assets, legal risks, post-investment management, information reporting, and industry self-discipline. The new notice also amends information on requirements for trust companies' qualifications, credit rating of trust funds, connected transactions, and accountability mechanism, among others. Finally, the new notice added new requirements such as banning the use of trust companies as conduit, enhancing proactive management responsibilities of trust companies, looking through underlying assets, strengthening suitability management of investors, imposing caps on investment proportions, and credit enhancement arrangement and conditions for exemption from credit enhancement.

     

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    Effective Date: July 01, 2019

    Keywords: Asia Pacific, China, Insurance, Insurance Fund Investment, Collective Trust Funds, Regulation and Supervision, CBIRC

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