(Yicai) Oct. 16 -- China has given the green light for the first five insurance asset management companies, including China Life Asset Management and Taikang Asset, to join a pilot to issue and manage asset-backed securities and real estate investment trusts.

The list of five firms that can widen their business scopes to issue these types of securities backed by income-generating assets also includes Pacific Insurance, PICC Capital Insurance Asset Management, and Ping An Asset Management, the Shanghai Stock Exchange and Shenzhen Stock Exchange announced recently.

The approval should enable listings and transfers of insurance assets on bourses for free circulation, which is conducive to attracting more non-insurance financial institutions to invest in these types of collateralized products.

"We are glad to be the first as we have been preparing for it this year," a firm involved in the pilot said to Yicai. “We have considerable experience in insurance asset management in asset-backed schemes, anticipating that new products should come out soon after we are qualified.”

Before this, insurance asset managers were allowed to create asset-backed plans through the Zhongbao Insurance Asset Registration and Exchange. As of Sept. 21, the system had 51 such plans worth CNY273.4 billion (USD37.4 billion), becoming important investment products for insurance funds, bank wealth management funds, and securities companies.

However, some insiders believe that the current system provides insufficient liquidity for insurance asset managers because the Zhongbao exchange considers asset-backed plans as "non-standard" business so there is no online transfer platform for transactions.

The latest move can help meet insurance funds' diversified allocation needs to increase their investment incomes, per Duan Guosheng, chief executive of Taikang Assets. Meanwhile, ABSs are expected to be increasingly linked to public REITs to revitalize infrastructure equity projects while insurance funds will have more ways to enrich the real economy, Duan added.

Editor: Emmi Laine