China insurance watchdog warns sector of cash crunch, low returns

SHANGHAI (REUTERS) - Some Chinese insurers may face a cash crunch this year as many policies mature, and as the sector faces sliding investment returns and rising costs, the China Insurance Regulatory Commission (CIRC) said.

Insurance companies need to broaden their investment channels to improve their returns, the CIRC said late on Thursday in its annual work report. The commission said it would also promote reform on the launch of infrastructure and real estate debt projects and introduce new types of investors.

"We see many more difficulties in ensuring steady growth of the insurance industry this year due to a comparatively lower investment return rate and the imminent peak of due payments on policies," commission chairman Xiang Junbo said in the report.

With existing average investment returns for insurers being lower than the interest rate of five-year deposits, more policyholders are expected to surrender their policies - a trend which may cause a number of insurers to face a cash crunch, the CIRC said.