Since 2006, the CIRC has issued a series of policies on the use of insurance funds to support insurance institutions to invest in infrastructure projects through creditor's rights and equity. At present, insurance funds mainly indirectly invest in infrastructure projects: professional management institutions such as insurance asset management companies, as trustees, initiate the establishment of trust and investment plans, raise funds from insurance companies and invest in infrastructure projects.
Up to now, insurance institutions have invested more than one trillion yuan in various infrastructure projects by initiating investment plans such as debt investment plan, equity investment plan and project asset support plan. The main investment projects include major national projects such as PetroChina's West-East Gas Transmission Project, South-to-North Water Transfer Project, Beijing-Shanghai High-speed Railway, and major livelihood projects such as urban rail transit, affordable housing projects and shantytown renovation projects. The debt investment plan has developed into an important financial product for the allocation of funds outside the insurance industry, such as enterprise annuities and bank wealth management funds, and has become the core business and an important source of income and profit for some insurance asset management companies.
For a long time to come, China will still be in an important strategic opportunity period of rapid development. The "Belt and Road" national strategy has been actively promoted, industrialization, informationization, urbanization and agricultural modernization have developed rapidly, and the investment scale of capital-intensive infrastructure projects is huge, which has a huge demand for medium and long-term investment funds. Compared with banks, securities, trusts and other financial departments, the insurance industry can provide huge funds with longer term, more stable supply and more reasonable capital cost, and it is qualified to become one of the important sources of long-term investment funds under the new economic normal.
External environmental challenges
From the external investment environment, insurance institutions still face some challenges in investing in infrastructure projects:
First, the local government debt risk is outstanding.
At present, local government financing platform is the main investment and financing subject of infrastructure projects, and the infrastructure investment and financing model based on platform debt financing is unsustainable. Most platforms are mainly engaged in public welfare or quasi-public welfare projects with long return period, such as infrastructure and park construction. It is difficult to repay the loan by the operating cash flow of the project and the company, and maintaining the capital chain mainly depends on land finance. Various explicit or implicit guarantees provided by local finance are the main motives for various social funds, including insurance funds, to provide financing for the platform.
In the long run, local fiscal revenue has a downward trend, and the repayment ability of local governments may further decline. Some local governments have weak contractual spirit and credit awareness, and their willingness to repay is low. There are even phenomena that "new officials don't recognize old debts", "manage loans regardless of repayment" and evade platform debts through administrative means.
In some areas, local governments borrow huge debts through multiple financing platforms, and it is more serious to borrow new and return old, and the platforms guarantee each other. The principal and interest of debts to be repaid in some cities have far exceeded the total financial resources at their disposal. In recent years, the net income of land transfer in second-and third-tier cities has generally fallen sharply, land finance is unsustainable, and regional investment risks have gradually emerged.
Second, it is difficult to implement the equity investment rights protection mechanism.
For example, in 2007, Ping An Assets initiated the establishment of an equity investment plan to raise insurance funds, became the second largest shareholder of Beijing-Shanghai High-speed Railway Co., Ltd., and appointed directors and supervisors. Due to the problems in the governance structure, related party transactions and core assets division of Beijing-Shanghai high-speed railway, the development quality and operational efficiency of Beijing-Shanghai high-speed railway have been affected. As a high-quality asset accounting statement, Beijing-Shanghai high-speed railway has suffered losses year after year, which has greatly damaged the investment enthusiasm of social capital such as insurance.
Third, there is a lack of supporting policies.
For example, the income from the equity investment plan of insurance funds is the after-tax distribution income of the target company and should be exempted from enterprise income tax. However, the current tax laws and regulations lag behind, and in practice, insurance companies face the problem of repeated taxation, which seriously affects the investment income and investment enthusiasm of insurance funds. Another example is that the registration system of assets mortgage and pledge of real estate investment plan is not clear, and it is impossible to register real estate mortgage and pledge in most parts of China, which seriously limits the risk management and rights protection ability of investment plan.
Regulatory policy restrictions
From the perspective of regulatory policies, a series of regulatory policies promulgated in June 20 12 have greatly broadened the operating space of venture capital plans, and the policy effects have already appeared. Judging from the situation reflected by market players, it is necessary to further revise the regulatory policy. At present, the outstanding problems are:
First, the legislative level of regulatory policy is too low.
At present, the investment plan is mainly based on departmental regulations and normative documents, and there are some informal regulatory caliber, which lacks the support of the superior law. The regulatory policy is too detailed and strict in micro-specific matters, and the revision is not timely and lacks institutional flexibility, which limits the product innovation space of insurance asset management companies.
Second, the scope of investment industry is narrow.
The regulatory policies restrict five investable industries, such as transportation, communication, energy, municipal administration and environmental protection, which do not match the key investment industries in the real economy. Existing investment plans are mainly concentrated in the fields of transportation, energy and real estate, accounting for more than 90% of the total. In the fixed assets investment by industry announced by the National Bureau of Statistics in 20 13, the top five industries are manufacturing, real estate, transportation, warehousing and postal services, water conservancy environment and public facilities management, electricity, heat, gas and water production and supply.
Third, it is highly dependent on external credit enhancement.
There are fewer debt repayment subjects that meet the requirements of regulatory policies to avoid credit enhancement. According to the ranking of top 500 companies in China in 20 13 years, there are less than 100 companies with annual operating income of not less than 50 billion yuan, and some companies have net assets of less than 30 billion yuan, which does not meet the regulatory requirements. In this way, most debt investment plans need to have very strong external credit enhancement, which significantly increases the financing cost of financing subjects and causes crowding-out effect on financing subjects with good credit qualifications. On the one hand, it reduces the space for professional management institutions to choose high-quality debt repayment subjects and reduces the market competitiveness of investment plans; On the other hand, the first repayment source of debt investment plan is generally weak, which forms potential risks.
Market subject problem
From the perspective of market players, there are some outstanding problems for insurance institutions to participate in infrastructure project investment:
The first is the restriction of industry culture.
There are long-standing cultural defects in the insurance industry, such as attaching importance to front-end sales, emphasizing current incentives and ignoring capacity building. The negative impact on the field of insurance asset management products is as follows: low-price competition and competing projects in the same industry, irregular investment agreements and legal risks, competing for limited professionals in the industry with high current incentives, generally ignoring follow-up management and risk control, and neglecting capacity building, risk control and post-investment management in a hurry to expand business.
Second, the investment management ability is generally insufficient.
At present, major projects such as insurance funds investing in infrastructure have the characteristics of single investment mode, short investment cycle, weak innovation consciousness, relatively scattered professional teams and weak investment risk management and control ability. Key infrastructure projects have large capital demand, long investment cycle, many legal problems and investment risks, high coordination and management costs, and investment risks are difficult to control. It is necessary to gather industry forces to dock major projects and enhance the investment ability of professional management institutions.
Third, the liability cost of insurance funds is increasing year by year.
In recent years, the competition between insurance and financial institutions, as well as brokers, funds, trusts, bank wealth management and other products has intensified, pushing up the channel sales expenses and debt costs of insurance products. The rate of return of insurance funds on investment plans exceeds that of enterprise annuities and bank wealth management products, which restricts the ability of insurance funds to invest in infrastructure projects through investment plans. Because the rate of return of investment plan can't cover its debt cost, some small and medium-sized insurance companies invest a lot in high-risk and high-return trust plans, which hides great risks.
Reflections on the path of innovation
First of all, insurance institutions need to strengthen capacity building.
Insurance funds, as liabilities of insurance companies, are reserves to ensure them to fulfill their insurance compensation or payment obligations, and are risk reserves and life-saving money for the middle class. Compared with financial products for high-net-worth customers such as trusts, private banks and private equity funds, insurance funds pay more attention to investment safety. Because of the large investment scale, long payback period, poor asset liquidity and low information transparency, infrastructure projects have great investment risks. Therefore, the investment management ability of insurance funds in infrastructure projects is much higher than that of publicly traded varieties such as stocks and bonds.
In order to effectively manage investment risks, professional management institutions should have a strong professional level in key business links such as project reserve, due diligence, credit rating, project evaluation, transaction structure design, decision-making approval, organization and implementation, product sales and follow-up management, and establish professional teams with experience in project investment, law, accounting, auditing, asset evaluation, credit rating and risk management. And establish a balanced operation mechanism to reduce personal professional ability and business resources. Insurance asset management institutions need to achieve professional operation, build a reasonable organizational structure, design professional operation processes, accumulate professional talents and resources, and effectively improve investment management capabilities and risk management levels.
Secondly, insurance institutions need to strengthen business innovation.
In recent years, insurance asset management companies have exercised their teams, accumulated business resources and established sales channels by vigorously developing quasi-standardized debt investment plan financial products. With the standardized management of local government debt, the implicit guarantee and rigid payment of local governments are gradually broken, and local financing platforms are facing transformation and differentiation. The Ministry of Finance, the National Development and Reform Commission and other departments are actively promoting public-private cooperation (PPP) between the government and social capital. It can be predicted that operating and quasi-operating infrastructure projects that meet the characteristics of relatively flexible price adjustment mechanism, relatively high degree of marketization, relatively large investment scale and long-term stable demand may mainly be financed through PPP in the future.
Insurance funds should adapt to this change, change the development focus of investment plan from corporate financing or platform financing to project financing in time, innovate transaction structure and product form, take the operating income of the project itself as the source of debt repayment funds, and reduce the dependence on external credit enhancement such as bank guarantee. Directly connect high-quality investment projects through the investment plan, the investment period matches the payback period of the project, and the debt repayment arrangement matches the net operating cash flow of the project. So as to reduce the refinancing risk of debt repayment subjects and the reinvestment risk of insurance funds, and give full play to the comparative advantages of insurance funds in providing medium-and long-term stable investment funds.
Third, the insurance industry needs to strengthen infrastructure construction.
First of all, trade associations need to play a greater role. China Insurance Asset Management Association has been established. The registration and inspection of financial products such as debt investment plans will be mainly undertaken by trade associations, and the regulatory authorities will pay more attention to systematic regional risk prevention. Trade associations need to constantly strengthen their own construction, give full play to their functions of rights protection, service, innovation and self-discipline, actively maintain market order and promote the development of industry norms.
The second is to build a clearing platform for investment plan transactions as soon as possible. Due to the strong personalized characteristics of investment plan, insufficient information disclosure, low liquidity and lack of market-oriented pricing and valuation mechanism, it is urgent to establish corresponding market infrastructure. Including: establishing or selecting asset trading places to make assets flow and revitalize the stock; There should be a specialized agency for product registration and confirmation, and a registration center and industry management platform should be established; Strengthen the binding force of information disclosure system on relevant stakeholders, and constantly improve the timeliness, continuity and comprehensiveness of information disclosure.
The third is to establish an industrial parent fund. By setting up an industry parent fund to invest in major infrastructure projects, the insurance industry can build a professional investment management platform at two levels: the industry platform and the company platform, coordinate the strength of the industry, improve the overall investment capacity and risk management level of the industry, and effectively realize investment diversification and smooth investment risks.
Finally, further improve the supervision methods and mechanisms.
In accordance with the general requirements of "opening the front end and managing the back end", we will strengthen and improve the supervision of the use of insurance funds to prevent and resolve risks and promote the healthy development of the industry.
The first is to improve the regulatory policy. Respect market players, encourage industry innovation, timely revise, integrate and simplify regulatory policies according to market conditions and development needs, and improve regulatory efficiency and flexibility. At the policy level, support insurance institutions to expand investment space, enrich investment tools and strengthen risk management and control to ensure that investment risks are controllable.
The second is to improve supporting policies. Actively strengthen communication and coordination with land, housing construction, finance, taxation, environmental protection and other departments and local governments, and promote relevant departments to introduce supporting policies to support insurance funds to invest in infrastructure projects as soon as possible.
The third is to strengthen risk management and control. Continuously monitor the investment risk of insurance funds, ensure the safety of insurance funds, and keep the bottom line of no systematic and regional risks.