Swiss Re handed RQFII licence in diversification drive

Reinsurance firm Swiss Re has become the first Switzerland-based institution to receive an RQFII licence from China’s securities regulator.

The award of the first licence to a reinsurer is seen as part of China’s efforts to diversify its investor base through expansion of the RQFII scheme to more asset owners.

Swiss Re intends to use its licence, once it has won a quota, to invest in China’s fixed income market.

The Zurich-based reinsurer announced its new licence late on Monday night but it received it on June 2. The China Securities Regulatory Commission (CSRC) has not yet updated its list of licence holders or made an announcement.

Chinese authorities granted Switzerland a renminbi qualified foreign institutional investor (RQFII) quota of Rmb50 billion ($8 billion) in January this year, and a renminbi clearing centre has been established in Zurich.

“Gaining access to the Chinese financial markets - as they grow in significance - has become vital for global long-term investors. The RQFII programme will further complement Swiss Re’s liability-matching investment capabilities,” said Guido Fürer, the group’s chief investment officer, in a statement on Monday.

Swiss Re will need to apply to the State Administration of Foreign Exchange for a quota to invest in onshore mainland China securities.

The firm said that an RQFII quota would allow it to predominantly invest into China’s fixed income market, which is accessible only to foreign investors through specific programmes.

European Reinsurance Company, a 100%-owned Swiss Re entity, received its qualified foreign institutional investor (QFII) licence and a $100 million quota in March last year.

Pictet Asset Management, another Swiss firm, applied for an RQFII licence through its London office, and received its licence in November and quota in December last year, as reported.

The RQFII programme was launched in late 2011, and the first group of investors to win quotas were Hong Kong-based fund managers and brokerage firm. But with China’s expansion of the programme, the investor base has been diversified to include foreign asset owners.

Swiss Re’s licence follows in the footsteps of other asset owners like Singaporean sovereign wealth fund GIC and Korea’s Samsung Life Insurance, which received their RQFII licences in February and March 2015 respectively. Other foreign insurers have won RQFII quotas through affiliated firms - UK insurer Aviva’s affiliated firm in Singapore, Aviva Investors Asia, received its RQFII licence in February and quotas in April.

Stephen Baron, deputy director of strategic solutions at Shanghai-based consultancy Z-Ben Advisors, said Swiss Re’s new licence did not surprise him, because one of the fastest-growing areas for the firm’s research clients has been amongst institutions, which have a strong interest in China’s onshore renminbi fixed income assets.

Charles Salvador, Z-Ben’s investment solutions director, said he believed the firm will use the licence for its own investments rather than for client asset management. “Swiss Re is also the first reinsurer in the RQFII programme, perhaps a sign of more asset owners and long-term investors joining,” he noted.

In all, China has expanded the RQFII programme to 13 countries with total quota awards of Rmb975 billion, but investors in Qatar, Canada, Luxembourg and Chile have not yet received a licence while Taiwan managers are waiting for approval from its legislators.