The State Administration of Foreign Exchange (SAFE) said Wednesday insurance companies, including foreign insurers operating in China, will be allowed to trade their forex funds in the interbank market starting on October 1.

The move will help insurance firms better manage their forex funds, which are mostly deposited in the banks, and improve their capability to settle claims, the administration said.

After they obtain SAFE's approval, insurance firms can borrow or make loans of no longer than four months at the Shanghai-based China Foreign Exchange Trade System.

An insurer's total interbank forex borrowings or lendings cannot exceed 50 percent of its owned forex capital, and single loans cannot be higher than 10 percent of the borrower's forex capital or 15 percent of the lender's forex capital.

In June 2002 the trade system launched interbank forex services which can "meet fairly well financial insitutions' needs to manage their foreign exchange positions," the administration said.

Chinese insurers have long been lobbying the government for more freedom in investing their indemnity funds, which they say is key to ensuring their repayment capacities.

Insurance regulators are reportedly considering allowing insurance companies to buy bonds in foreign markets.

(China Daily September 18, 2003)