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Heavy! State Administration of Financial Regulation: Carry out a pilot project for insurance funds to invest in gold business

According to the website of the State Administration of Financial Supervision and Administration on February 7, in order to broaden the channels for the use of insurance funds, optimize the structure of insurance asset allocation, and promote insurance companies to improve the level of asset and liability management, the State Administration of Financial Supervision issued the “Notice on Carrying out the Pilot Project of Insurance Fund Investment in Gold Business” (hereinafter referred to as the “Notice”), and carried out the pilot project of insurance fund investment in gold business from the date of issuance of the “Notice”.

The “Notice” mainly puts forward clear requirements from three aspects: pilot content, pilot requirements and supervision and management. In terms of pilot content, the Notice defines the business scope and investment methods of the pilot investment in gold, and identifies 10 pilot insurance companies. In terms of pilot requirements, the “Notice” regulates the ex-ante and ex-ante management of investment in gold by pilot insurance companies. In terms of supervision and management, the Notice clarifies the regular reporting and interim reporting mechanisms and relevant supervision and management requirements for the pilot business.

Carrying out the pilot project of insurance funds to invest in gold business is a useful measure to deepen the reform of the use of insurance funds and promote the high-quality development of the insurance industry. In the next step, the State Administration of Financial Supervision will closely track the progress of the pilot, strengthen supervision and management, do a good job in the implementation of the Notice, and promote the healthy development of insurance funds investing in gold business.

Circular of the General Office of the State Administration of Financial Supervision and Administration on Launching a Pilot Project for Insurance Funds to Invest in Gold Business

Pilot insurers:

In order to broaden the channels for the use of insurance funds, optimize the allocation structure of insurance assets, and promote insurance companies to improve the level of asset and liability management, the State Administration of Financial Supervision has decided to carry out a pilot project of insurance funds investing in gold. The relevant matters are hereby notified as follows:

First, the main content of the pilot

From the date of issuance of this notice, pilot insurance companies may carry out pilot investment gold business for the purpose of medium and long-term asset allocation.

(1) The scope of pilot investment in gold. Gold spot physical contracts, gold spot deferred delivery contracts, Shanghai gold centralized pricing contracts, gold inquiry spot contracts, gold inquiry swap contracts and gold leasing business listed or traded on the main board of the Shanghai Gold Exchange.

(2) Pilot participants. Chinese People’s Property & Casualty Insurance Co., Ltd., Chinese Life Insurance Co., Ltd., Taiping Life Insurance Co., Ltd., China Export & Credit Insurance Corporation, Ping An Property & Casualty Insurance Co., Ltd., Ping An Life Insurance Co., Ltd., China Pacific Property & Casualty Insurance Co., Ltd., China Pacific Life Insurance Co., Ltd., Taikang Life Insurance Co., Ltd., New China Life Insurance Co., Ltd.

2. Pilot investment requirements

(1) Strict decision-making and approval procedures. The investment of pilot insurance companies in gold shall be deliberated and approved by the board of directors, and a decision-making and authorization mechanism with clear responsibilities and authorization shall be established, and reasonable gold allocation and investment strategies shall be formulated according to the requirements of asset allocation and risk management.

(2) Equipped with qualified personnel. Pilot insurance companies investing in gold should set up positions such as investment research, transaction delivery, risk control and compliance, clearing and accounting, etc., so as to achieve strict separation of front, middle and back office personnel and responsibilities. Pilot insurance companies should be equipped with personnel suitable for the scale of gold investment business, among which, investment research, transaction delivery positions should be equipped with at least 2 personnel who have passed the national gold trading level examination, and risk control compliance, clearing accounting and other positions should be equipped with at least 1 person who has passed the national gold trading level examination.

(3) Establish an investment management system. Pilot insurance companies shall establish a gold investment management system, including but not limited to authorization management, investment decision-making, research and analysis, transaction delivery, liquidation and accounting, information system, internal control, risk management, related party transactions, etc.

(4) Improve the information management system. Pilot insurance companies that invest in gold by becoming members of the Shanghai Gold Exchange shall establish an information technology system that meets the requirements of the technical operation specifications of the Shanghai Gold Exchange, and if they carry out gold investment through the agent seats of commercial banks, they shall do a good job of docking with the systems and accounts of commercial banks to meet the needs of investment transactions, accounting and risk management.

(5) Adhere to the concept of prudent investment. Pilot insurance companies investing in gold should flexibly use block trading, inquiry trading, bidding transactions and other methods to build positions in phases and batches to avoid the impact on the market due to abnormal trading behaviors. Pilot insurance companies shall use monetary funds to invest in gold, and shall not handle the business of physical gold in and out of storage.

(6) Pilot insurance companies investing in gold spot deferred delivery contracts shall reasonably control the scale of their business for the purpose of risk management or asset allocation, and prohibit their use for speculative arbitrage.

(7) When a pilot insurance company invests in gold inquiry spot and swap contracts, the counterparty shall be limited to financial institutions, and the credit line shall be managed well to effectively prevent credit risks. Pilot insurance companies should strictly control the scale of swap financing, integrate funds and prohibit investment in high-risk and illiquid assets, and the net short exposure at the far end of the swap business should be lower than the gold spot assets held by the insurance company at any point in time.

(8) When a pilot insurance company carries out gold leasing business, the counterparty shall be limited to financial institutions, and the concentration of counterparties shall be reasonably controlled, and the leasing scale of a single counterparty shall not exceed 20% of the gold spot contracts held by the pilot insurance company.

(9) The pilot insurance company shall strictly implement the investment ratio requirement, and the total book balance of invested gold shall not exceed 1% of the company’s total assets at the end of the previous quarter. The calculation of the investment ratio of the pilot insurance company shall comprehensively and truthfully reflect the investment situation, and the market value of the gold spot contract shall be used as the statistical criterion for the deferred delivery contract of the business, and the net exposure of the gold position of the gold inquiry swap contract shall be used as the statistical criterion, and the unilateral scale of existence shall not exceed 1% of the total assets of the company at the end of the previous quarter. The scale of gold lent by pilot insurance companies should be included in the management of investment ratios.

(10) Pilot insurance companies investing in gold shall strengthen operational risk management, improve the operational risk management system, improve the risk management process, and establish a pre-transaction grading approval, transaction execution two-person review and emergency response mechanism.

3. Supervision and management

(1) Establish a periodic reporting mechanism. The pilot insurance company shall submit a report on the development of the pilot business to the State Administration of Financial Supervision within 5 working days after the end of each quarter.

(2) Establish an ad hoc reporting mechanism. During the pilot period, if there is a situation that does not meet the requirements of this notice or a relevant major risk event occurs, the pilot insurance company shall report to the State Administration of Financial Supervision within 10 working days, and shall not add new gold investment before meeting the requirements of the pilot.

(3) The State Administration of Financial Supervision shall supervise and manage the investment in gold business of the pilot insurance company in accordance with the law, and if it violates the requirements of the pilot or other relevant regulatory provisions, it shall be ordered to make corrections within a time limit, and its pilot qualification shall be cancelled if the circumstances are serious.

General Office of the State Administration of Financial Supervision and Administration January 22, 2025

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