DOMESTIC insurance firms face possible risks from “irrational” stock investments and large-scale overseas mergers and acquisitions, the People’s Daily quoted a top regulatory official as saying yesterday.

    In a shift away from low-yielding corporate bonds, domestic insurers, led by privately owned Anbang Insurance Group and Ping An Insurance, have snapped up real estate, bank and other insurance company stakes at home and overseas.

    Insurance firms will be encouraged to make long-term investments and better serve the real economy, the paper quoted Chen Wenhui, vice chairman of the China Insurance Regulatory Commission, as telling a meeting of officials.

    “2017 may be a very difficult year for the use of insurance funds,” Chen said, adding that authorities would tackle “hidden dangers” in the industry, while firms needed to “maintain a high degree of vigilance” over risks.

    Chen cited “regulatory arbitrage” activities as a problem, in addition to the “irrational” stake bidding and large-scale cross-border activities, the paper added.

    Shenzhen-based Securities Times quoted Chen as saying Thursday that domestic insurers should take a cautious approach when investing overseas.

    “Blind outbound investment” by insurers, often with high leverage, involved tens of billions of yuan worth of risks in some cases, Chen was quoted as saying.

    “Some companies behave like a little boy rushing into a candy store when making overseas investment,” Chen said.

    Chen made the remarks at a time when the government is stepping up efforts to stem capital outflows that adds depreciation pressure to the yuan, and threatens to exhaust China’s forex reserves. (SD-Agencies)