Report | Insurers can help tackle share-backed loan risks

China is encouraging insurers to invest in listed companies and help cut liquidity risks connected with the pledging of firms’ shares to secure loans, the China Securities Journal reported on Saturday, citing a senior official with the banking and insurance regulator.

The government welcomes insurance companies making financial and strategic investments in quality, private, listed companies, the official newspaper cited Ren Chunsheng, of the China Banking and Insurance Regulatory Commission, as saying. The insurers can play a “more flexible” role in cutting share-pledge risks, Ren said at a forum.

The report didn’t give more details on the issue from Ren, who’s head of the regulator’s insurance asset management department.

Share pledges, where company founders and other major investors put up stock as collateral, have emerged as a pressure point in China’s debt-laden economy, especially as the stock market tumbles. Top regulators discussed the risks at a meeting in August, saying that further efforts are needed to ensure stability.

Regulators will also revise rules to scrap sector restrictions on insurers’ private equity investments in a bid to boost the supply of long-term capital to the economy, Ren was cited as saying by the newspaper, which is affiliated with the official Xinhua News Agency.

Officials are seeking to direct more insurance funds to small businesses and key projects that support state strategies, and will encourage insurers to participate in the financial derivatives market and set up units for debt-for-equity swaps, the report cited Ren as saying, without providing details. Bloomberg