This requires insurance assets management companies to use differentiated competition strategies and fully utilize different instruments. CIRC should fully support product innovation, help those companies get access to the real economy and government resources to lower costs and expand the scope of their entrusted businesses, according to the report.

For CIRC, the bottom line is to avoid regional and systematic risks. It can intensify supervision while at the same time loosening restrictions. The ultimate goal is to enhance insurers' ability to manage assets, said the report.

While most insurers and investors applaud further opening up, some industry insiders remain cautious to the simmering risks.

"The new regulation has put forward a higher requirement for the supervision ability of regulatory bodies, and the risk control ability of insurers," said Pan Cheng, an analyst at the China Securities Co. Ltd.

The 13 policies allow investment in stock index futures and Treasury bond futures. If the investment is used for arbitrage or speculative activities, the risks will be huge. If not well supervised, it's hard to control the risks, said Pan.

For insurers, choosing investment instruments will be easier but they will face more complicated and a larger number of risks than before. It will put forward a higher requirement for their risk control ability.

Insurers shouldn't conduct aggressive investment as soon as the policies come out but should take into consideration its own investment and risk control ability. "They need a process to enhance themselves to meet the higher requirements of the new policies," said Pan.

Overseas investment

Insurance funds will be invested in more countries and regions, such as the bond market in developed countries and emerging economies. Among the 13 policies, the regulation for overseas investment, which has been in the making for three years, is expected to be implemented before others.

As the implementation rules to the 2007 edition of regulation on insurance funds' overseas investment, the new regulation will specify not only the qualified market but also products that insurers can invest in. There are 45 qualified countries and regions, covering developed markets such as Australia, the United States, Japan, Germany, France and Greece, and emerging markets such as Brazil, Indonesia, Turkey and the Philippines. Qualified products consisting a total of 15 include commercial paper, money market funds, bank deposits, bonds, convertible bonds, stocks, equity products and America depositary receipts.

The new regulation also gives the green light to real estate investment for the first time. Insurers are allowed to invest in commercial and office properties that foreign companies possess in China by acquiring shares of those companies.

CIRC sets the ceiling of overseas investment at 15 percent—more than 900-billion-yuan ($141.66-billion) insurance funds are available for overseas investment.

Chinese insurers used to be extremely cautious in overseas investment. China Ping'an Insurance, one of the top three insurers in the country, has been emphasizing that its liabilities are settled by the yuan. Overseas investment will face not only market risks but also exchange rate fluctuations. Therefore, overseas investment of China Ping'an is focused on projects that are closely related to the mainland, mainly the Hong Kong stocks.

With CIRC's new resolution to loosen investment restrictions, China Ping'an will embark on investing in developed markets and emerging economies in the future, according to a staff member of the company's information department.

Four Stages of Insurance Funds Investment

- In March 1985, China released the Regulations on Administration of Insurance Companies, restarting the insurance industry that had been dormant for almost 20 years. From 1985 to 2003, insurers were strictly regulated and their insurance funds could only be invested in bank deposits, government bonds, financial bonds and other destinations approved by the State Council.

- From 2003 to 2006, insurance companies experienced overall opening up. During the period, investment channels such as securities investment funds, bonds and stocks, were successively opened to insurance funds.

- From 2006 to 2011, CIRC opened innovative investment channels, such as infrastructure, real estate, equity and overseas investment, for insurers.

- In 2012, the formulation of the 13 policies means insurance funds investment will enter a totally market-oriented era.

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