Chinese insurance funds must not be used to provide covert funding to local governments and must serve the real economy, reported the Xinhua News Agency citing a deputy chairman of the CIRC.
The official, Mr Chen Wenhui, said that "fake creativity" in the use of insurance funds must also be banned.
"There must be long-term, value investment and diversified investment," Mr Chen said.
China is in the second year of a campaign to reduce risks from a rapid-build up in debt and riskier types of financial activities, which has included greater scrutiny of local government spending and debt.
The insurance regulator said last month it would "pay high attention" to liquidity, credit and asset-liability mismatch risks of insurers.
Last month, the Chinese authorities also said that they had tightened rules on how insurers can provide financing to local governments. In a notice issued then, the CIRC and the Ministry of Finance said that they “resolutely ban” local governments from illicitly starting new projects and building new debt through channels such as local government financing vehicles or government investment funds “in the name of attracting insurance companies”.
Thousands of local government financing vehicles, or LFGVs, have been created across China by local authorities to help them hit economic growth targets. The vehicles have taken on trillions of yuan in debt from banks, the bond market and shadow lenders, helping local governments bypass Beijing’s limits on borrowing. Much of the debt comes with implicit local government guarantees.
For any debt financing related to LGFVs, insurance companies are required to provide specific legal opinions on the compliance of their investments, the regulator and the finance ministry said in the notice.
Insurance companies are required to view the vehicles as normal state-owned companies, and conduct strict risk assessment of LGFV projects based on their commercial viability instead of government creditworthiness.