AMENDMENTS TO REGULATIONS GOVERNING FOREIGN INVESTMENTS BY INSURANCE COMPANIES

09/01/2011

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To expand investment channels of insurance companies and enhance their fund-use efficiency and investment performance, and taking into consideration that insurance companies, compared to others in the financial industry, require more extensive long-term investment objects as well as higher asset allocation flexibility, the Financial Supervisory Commission announced amendments (the "Amendments") to Article 12 of the Regulations Governing Foreign Investments by Insurance Companies (the "Regulations") on 18 August 2011. Under the Amendments, an insurance company is allowed, subject to specific investment amount limit, to invest in certain Renminbi denominated securities that are traded on Hong Kong Exchanges. Main points of the Amendments:
l	Insurance companies are allowed to invest in certain securities denominated in Renminbi and traded on Hong Kong Exchanges
	Paragraph 1 of the Amendments sets out the foreign investments that the insurance industry is allowed to make and a new item 7 is included. Such item expands the insurance industry's foreign investment scope to Renmibi denominated bonds issued by international organizations or Renmibi denominated corporate bonds or financial debentures which are issued by issuers other than the following:
	1.	companies incorporated in Mainland China;
	2.	Hang Seng China-Affiliated Corporations Index's Component Stocks; and
	3.	companies that have 30% or more of their outstanding shares owned directly or indirectly by the government or corporations of Mainland China.
l	Insurance companies may engage in financial derivatives transactions for hedging
	Under item 9 of paragraph 1 of the Amendments, an insurance company may engage in financial derivatives transactions for the purpose of hedging, subject to the actual investment amount made by such insurance company in Renminbi denominated investment objects in Mainland China or Hong Kong under the Regulations.