China's National Financial Regulatory Administration (NFRA) issued a notice on December 5 adjusting risk factors for insurers' related businesses, with the key measure being a reduction in capital requirements for long-term equity investments.
The regulator stated the move aims to refine solvency supervision standards while leveraging insurance funds' advantage as "patient capital" to better serve the real economy, maintaining risk control as the bottom line.
For insurers holding CSI 300 index constituents or CSI Dividend Low Volatility 100 index stocks for over three years (based on six-year weighted average holding period), the risk factor drops from 0.3 to 0.27. Similarly, the risk factor for STAR Market-listed stocks held beyond two years (four-year weighted average) decreases from 0.4 to 0.36.
Additionally, premium risk factors for export credit insurance fall from 0.467 to 0.42, while reserve risk factors decline from 0.605 to 0.545. These adjustments effectively improve insurers' capital utilization efficiency.
Experts interpret this as a strategic push to channel long-term insurance funds into equities. "The policy encourages insurers to extend holding periods while alleviating solvency pressure through reduced capital charges," noted Wang Guojun, insurance professor at University of International Business and Economics.
Zhu Junsheng, postdoctoral researcher at Peking University, highlighted the regulatory support for capital market stability. The NFRA requires insurers to strengthen internal controls, accurately measure holding periods, and enhance long-term investment capabilities while ensuring solvency data integrity.
This follows previous risk factor reductions in September 2023 (CSI 300 stocks from 0.35 to 0.3, STAR Market stocks from 0.45 to 0.4) and reflects NFRA chief Li Yunze's May pledge to further cut equity risk factors by 10% to boost market participation.
Industry analysts observe multiple benefits: 1. Improved capital efficiency enables greater equity allocation, particularly in quality assets 2. Enhanced long-term investment strategies build more stable portfolios 3. Optimized risk structures allow higher investment returns without compromising solvency 4. Strengthened support for strategic industries and innovation-driven enterprises
The adjustment demonstrates regulators' commitment to stabilizing markets through institutional investor participation while maintaining prudent oversight.
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