Pfi [2017] 41

Insurance regulatory bureaus, insurance group (holding) companies, insurance companies, insurance asset management companies:

In order to thoroughly implement the spirit of the Opinions of the CPC Central Committee and The State Council on Deepening the Reform of the Investment and Financing System (Zhongfa [2016] No. 18) and the Opinions of The State Council on Accelerating the Development of Modern Insurance Service Industry (Guofa [2014] No. 29)，We will promote innovation in financing methods for public-private partnership (PPP) projects，We will support insurance funds to better serve the real economy，In accordance with the Administrative Measures for Indirect Investment of Insurance Funds in Infrastructure Projects (hereinafter referred to as the Administrative Measures) and other provisions，The following is the notice regarding the investment of insurance funds in PPP projects:

1. The insurance funds mentioned in this notice are invested in PPP projects，It refers to professional management institutions such as insurance asset management companies as trustees，Initiate the establishment of an infrastructure investment plan，Issuance of benefit certificates to qualified investors such as insurance institutions to raise funds，Provide financing to project companies that sign contracts with the government for PPP projects，Invest in PPP projects that comply with regulations。

In addition to meeting the relevant provisions of Articles 11 and 12 of the Administrative Measures, the PPP projects invested in the investment plan shall also meet the following conditions:

(1) Belong toNational or provincial key projectsHas fulfilled the approval, approval, filing procedures and the PPP implementation plan review and approval procedures, andIt will be included in the PPP project database of the National Development and Reform Commission or the project database of the National PPP Comprehensive Information Platform of the Ministry of Finance。

(2) The main social capital party that undertakes the responsibility of project construction or operation management is the industry leading enterprise,The main credit rating is not less than AA+, and the bonds have been publicly issued in the domestic market in the past two years。

(3) The contracting party of the PPP project contract shall be the municipal government (including) or above or its authorized institutions, as agreed in the PPP project contractFiscal expenditure responsibility has been incorporated into the annual budget and medium-term fiscal plan。The regional financial environment and credit environment are good, and the level of government debt is low。

(4) A reasonable investment return mechanism has been established, which is expected to generate sustainable and stable cash flow and good social benefits。

3. The investment plan may invest in one or a group of qualified PPP projects by means of debt, equity, combination of equity and debt, etc。The investment plan shall meet the following conditions:

(a) The professional lawyer issued a special legal opinion, determined that the operation procedures of the investment PPP project compliance, the relevant PPP project contract specification and effective。

(2) It has expected stable cash flow, can cover the investment principal and reasonable income of the investment plan, and set a clear, feasible, legal and compliant exit mechanism。

(3) The investment agreement clearly stipulates that if the major social capital transfers the equity of the project company during the duration of the investment plan, the written consent of the investment plan trustee shall be obtained。

4. Professional management institutions such as insurance asset management companies act as trustees of investment plans，Should have the infrastructure investment plan or real estate investment plan product innovation ability，Earnestly fulfill the duty of diligence and due diligence，Comprehensively assess investment risks and returns，We will strengthen risk control and post-investment management，Ensure investment plans are legal and compliant，Maintain the safety of insurance funds。

5. The CIRC establishes a risk review mechanism for external experts to urge investment plans to fully disclose and disclose investment risks。Investment plans involving the "Belt and Road", Beijing-Tianjin-Hebei coordinated development, the Yangtze River Economic Belt, poverty alleviation and Hebei Xiongan New Area and other major projects in line with the national development strategy, the China Insurance Regulatory Commission established a special business acceptance and registration of green channels。

6. The insurance regulatory bureaus shall, according to the actual local supervision, study and reflect the situation and problems of insurance funds' investment in PPP projects, coordinate, promote and implement the relevant policies of insurance funds' investment in PPP projects, and form an up-down supervisory mechanism for the use of funds。

7. The operation and management of the investment plan and other related matters shall be implemented in accordance with the relevant provisions of the Administrative Measures。

8. This Notice shall enter into force on the date of promulgation。

China Insurance Regulatory Commission

May 4, 2017

Exclusive interview, analysis of insurance funds docking PPP behind the release of new regulations 

Source: China Water Network

On May 5, the official website of the China Insurance Regulatory Commission published the Notice of the China Insurance Regulatory Commission on Matters Related to Insurance Fund Investment in Government and Social Capital Cooperation Projects (hereinafter referred to as the Notice).。The "Notice" is divided into eight parts, mainly from the clear policy support and strengthen risk control and other aspects of the insurance industry to participate in the government and social capital cooperation projects related to the provisions。In order to understand the policy in more detail, China Water Network Xiaobian interviewed an expert close to the insurance Regulatory Commission, experts will analyze the relevant issues of insurance funds docking PPP。

What is the background of the Notice and what are the specific considerations for the preparation of the Notice?

Expert: At present, public-private partnership (PPP) has the advantages of controlling government debt, easing fiscal expenditure pressure, and improving the supply efficiency of public goods, so it has become the operation mode of infrastructure and public service projects actively promoted by the former State Council and relevant ministries。According to statistics, from 2014 to 2017, the country has announced the winning bid of social capital PPP projects reached more than 2,500, the total scale of investment is 4.2 trillion yuan。

Government departments have also given strong policy support. Since 2014, the National Development and Reform Commission, the Ministry of Finance and relevant ministries have issued more than 160 relevant policy documents, and provincial governments have successively introduced specific measures to implement PPP work and established relevant promotion agencies。

However, at present, the development of PPP projects is also restricted by large investment scale, long term, and insufficient credit of the main body of the project company, and problems such as difficulty in landing financing have appeared。

In the insurance industry, insurance funds have the advantages of long-term and large scale, and participation in PPP project investment can give full play to its advantages, and can effectively match the financing needs of PPP projects to support the development of the real economy。PPP projects have relatively stable cash flow, which can help insurance funds achieve high-quality allocation of assets。

At present, some insurance institutions have begun to participate in PPP project investment through equity investment plans, debt investment plans, direct equity investment, trust plans, investment funds and other investment vehicles。In 2016, there were a number of cases of investment in PPP projects in the insurance industry, and Guoshou Shares contributed 21 through trust plans and investment funds.1.6 billion yuan invested in the Qingdao Metro Line 4 project, and also contributed 116 through the trust plan.4.4 billion yuan invested in Ningbo Five roads and four Bridges project;Taiping Investment Investment 1.500 million yuan, directly participate in Hohhot Metro Line 1 project company;Pacific Assets initiated a debt investment plan of 2 billion yuan to provide financial support for subsidiaries of central enterprises construction enterprises and invest in five Henan provincial key construction projects such as Zhengzhou Zhengxin Express Channel。

Q: What is the impact of insurance funds' participation in PPP investment projects on the PPP market?

Experts: The release of the Notice has supported the participation of insurance funds in PPP projects from a policy perspective。In 2016, the CIRC issued the "Measures for the Management of Insurance Funds Indirect Investment in Infrastructure Projects" (CIRC Order No. 2 of 2016), briefly supporting insurance funds to enter PPP projects。The successive release of these two policies helps PPP projects to solve the problem that there is no operating history, the financing model and risk points are materially different from mature enterprises, and the financing faces more difficulties。

The Notice gives policy support from four aspects: First, broaden investment channels, and clarify that insurance funds can provide financing to PPP project companies through the form of infrastructure investment plans。The second is to innovate investment methods. In addition to debt and equity methods, innovative ways such as the combination of stocks and bonds can also be adopted to meet the financing needs of PPP project companies。The third is to improve regulatory standards, cancel the mandatory requirements for the main qualification and credit enhancement of PPP project companies, and hand them over to market entities。The fourth is to establish a green channel, for PPP projects in line with the national development strategy, to establish a special green channel for business acceptance and registration, to improve operational efficiency。

Q: What are the requirements for the supervision of PPP projects when the insurance industry participates in PPP investment projects?

Expert: The release of the "Notice" is to clarify the regulatory requirements for PPP projects, major social capital parties and the government, ensure the legal compliance of the project, and control the risk of project construction and operation。The "Notice" retains a large investment space for insurance funds, and at the same time can control the risk bottom line of the project。

The second is to strengthen the management of investment plans, clarify the management responsibilities of trustees, assign the responsibility of risk management to market entities, and improve the exit mechanism of insurance funds to prevent insurance funds from bearing the ultimate acceptance risk。

Third, establish an external expert risk review mechanism and a regulatory linkage mechanism to fully reveal, disclose and monitor investment risks。

The release of the "Notice" provides a suitable path for insurance funds to participate in PPP project investment, which is conducive to solving the bottleneck constraints of PPP project companies' financing difficulties, supporting the promotion of PPP projects, while meeting the needs of insurance funds allocation, and achieving a win-win situation for industry benefits and real economy development。In the next step, the CIRC will further improve the relevant investment ratio, solvency and other supporting regulatory standards to better play the policy effect。

Zhang Liao, Chairman of Jibang Consulting, comments:

1.Compared with the management measures for insurance capital investment infrastructure projects, the threshold is appropriately lowered, reflecting the tone of regulatory support and encouragement, but in combination with the uneven characteristics of PPP projects, basic requirements are put forward from the project level, the main sponsor, the level of cooperation government;

2.The investment form is equity, debt or a mix of forms, no longer the previous single debt program。The new term "infrastructure investment plan" is worth savoring as a kind of asset management plan？Fiduciary law？Or some other legal norm？

3.Other measures to protect the safety of the insurance investment, such as legal advice from lawyers;Insurance capital and social capital advance together (social capital withdrawal from the SPV must be approved by the trustee);Regulators use an outside expert risk review system (experts are busy again)...

4."The scheme trustee should have the product innovation capability of infrastructure investment plan or real estate investment plan" is a bright spot, and it would be better if the "product innovation capability" is further clarified。I understand that I want to emphasize the professional teams, professional capabilities and professional methods that fiduciary asset management institutions should possess in investing in alternative assets such as infrastructure PPP。

5.Show political correctness。Investment in line with the national development strategy and policy hot spots, enjoy the approval of the green fast channel。

Summary: Moderate relaxation under the existing regulatory ideas of approved insurance investment。How to encourage and support insurance investment PPP funds is still to be solved。