CHINA is to encourage insurers to raise capital and cap executive packages and shareholder dividends to boost their solvency, according to the regulator.

The China Insurance Regulatory Commission will limit insurers' scale of business if they experience solvency problems as a result of fast expansion, the CIRC said on its Website.

The CIRC can take a number of other regulatory actions including limiting management salaries, advertisements, or changing the management team, the regulator said, citing Wu Dingfu, chairman of the CIRC who delivered a speech at the commission's mid-year meeting on Tuesday.

The CIRC also encourages qualified insurers to raise further capital by going public, selling additional shares or issuing bonds, Wu said.

China issued rules on Monday to step up solvency requirements for the nation's insurers. Insurers must meet solvency ratios of at least 100 percent to help companies better match their assets with their liabilities from September 1.

The new rules should not have a direct impact on listed insurers, given their high solvency margins, normally more than 180 percent, Goldman Sachs said yesterday.

"We believe the new rules should help improve the pricing and investment discipline of insurers in the longer term," Goldman Sachs said.

Wu also highlighted the "too quick" development of investment-linked products and asked insurers to prevent risks on products.

The investment-linked products, whose performance is linked to capital markets, sold well last year when the stock market was still bullish.

The benchmark Shanghai Composite Index has lost half since its record high last year, leaving policyholders facing losses on investment accounts.

The tumbling stock market also triggered challenges for insurers in their investment returns in the first half.

Insurers such China Life Insurance and Ping An Insurance reported healthy profits last year, largely driven by the rising stock market.