Declining interest rates in China are said to have led to narrowing spreads and increased reinvestment risk for domestic insurance firms, which ultimately places a greater onus on insurers’ asset-liability management.
Global ratings agency AM Best, has stated that with yields of 10-year government bonds remaining below 3% across the past couple of years, they are no longer meeting the assumed rate-of-return requirements for some long-term protection products.
Looking back, the investable portfolio of China’s insurance industry increased by 9.9% year over year, to CNY 27.1 trillion (approximately USD 3.7 trillion) as of the end of June 2023, according to statistics from The National Administration of Financial Regulation (NAFR).
Best noted that the asset mix has been largely stable so far since 2022 and through H123. The proportion of bonds has gradually increased and also remains the largest asset class, accounting for 43%.
The share of bank deposits and other assets also declined modestly from Q122 to the end of June 2023, while the proportions of equities, investment funds, and long-term equity investments are said to have remained stable.
Additionally, Best stated that the proportion…
