The first-quarter data on insurance capital utilization has been released, with bonds continuing to dominate asset allocation, while the balance of stock investments is approaching the scale of active equity funds managed by public funds.
On May 15, the National Financial Regulatory Administration published the first-quarter 2026 data on insurance company fund utilization. By the end of March, the total utilized funds of insurance companies reached 39.44 trillion yuan, marking a sequential increase of 2.49%.
In terms of asset allocation, bonds maintained their dominant share. By the end of the first quarter, life insurance companies allocated 51.18% to bonds, and property & casualty insurers allocated 40.98%, both showing slight sequential increases.
Regarding the book balance of insurance capital, the combined stock holdings of life and property & casualty insurers totaled 3.837 trillion yuan by the end of Q1. This represents a 2.7% increase from the stock allocation at the end of Q4 2025 and approaches the scale of active equity funds during the same period.
The latest utilization data signals at least two key trends: bonds remain a crucial stabilizing component, while the stock allocation indicates a strong willingness and proactive stance for "insurance capital entering the market." This move aims to address pressures from "interest spread losses" and "asset shortages" in the low-interest-rate environment.
**Rising Influence in Equity Markets**
Bonds constitute a significant portion of holdings for both life and property & casualty insurers. By the end of Q1, life insurers' bond allocation stood at 18.2 trillion yuan, and property & casualty insurers allocated 1.01 trillion yuan, totaling 19.21 trillion yuan, with the bond allocation ratio experiencing a slight rebound.
Research from Guotai Junan Securities' non-banking team anticipates that bond assets will continue to serve as a stabilizer for insurers to improve duration gaps and secure stable returns. It also reflects insurers' flexible balancing of allocation and trading strategies.
In other asset classes, life insurers allocated 10.14% to stocks, 7.98% to long-term equity investments, 7.51% to bank deposits, and 5.25% to securities investment funds by the end of Q1. Property & casualty insurers allocated 16.30% to bank deposits, 9.46% to stocks, 8.09% to securities investment funds, and 5.66% to long-term equity investments.
Market attention is particularly focused on changes in stock holdings. Zhongtai Securities research indicates that by the end of Q1, the stock allocation ratio reached 10.14%, a historically high level. From Q1 2024 to Q1 2026, the proportion of stock holdings has steadily increased, with figures of 6.7%, 7.0%, 7.5%, 7.5%, 8.4%, 8.8%, 10.0%, 10.1%, and 10.14%, respectively.
Zhongtai Securities notes that by the end of Q1, insurers' total stock holdings amounted to 3.837 trillion yuan. This is close to the 3.9944 trillion yuan scale of active equity funds (including ordinary stock, partial equity hybrid, and flexible allocation types) during the same period, suggesting a gradual enhancement of insurance capital's influence in the capital markets.
However, stock market performance in Q1 was not particularly optimistic. Impacted by geopolitical tensions, the three major A-share indices closed lower: the Shanghai Composite Index fell 1.94% to 3891.86 points, the Shenzhen Component Index declined 0.35% to 13478.06 points, and the ChiNext Index dropped 0.57% to 3184.95 points.
Looking ahead, most brokerages and research institutions hold a relatively positive outlook. They believe that while external risk factors may fluctuate, their impact on capital markets will gradually diminish. A-shares are expected to refocus on domestic economic fundamentals, with the market likely maintaining a volatile upward trend.
Data from the second quarter supports this view. As of May 15, all three major A-share indices have shown gains: the Shanghai Composite Index rose 6.26%, the Shenzhen Component Index increased 15.46%, and the ChiNext Index surged 23.36%.
**Optimizing Asset-Liability Balance**
Alongside fund utilization data, the financial regulator also released insurers' solvency figures for Q1 2026.
Data shows that by the end of Q1, life insurers' comprehensive and core solvency adequacy ratios were 170.7% and 118.1%, respectively, up 1.4 and 3.1 percentage points sequentially. For property & casualty insurers, these ratios were 242.6% and 210.6%, down 0.9 and 2.1 percentage points sequentially.
"Overall, in Q1, factors such as the continued downward shift of the 750-day moving average government bond yield curve and capital market volatility put pressure on the solvency of most small and medium-sized life insurers. However, improvements at leading institutions like China Life and Ping An Life contributed to a slight overall industry increase in solvency," according to Zhongtai Securities research.
Notably, the transition period for the "C-ROSS Phase II" rules ended at the close of 2025. This means that solvency reports for non-listed insurers in Q1 2026 generally apply the stricter capital measurement standards of C-ROSS Phase II. Nevertheless, the latest reports indicate that over 90% of insurers met solvency requirements for Q1 2026.
To mitigate solvency declines, many insurers have opted for capital replenishment methods like capital increases and bond issuance. For instance, five insurers have increased registered capital this year: Huatai Life, Zhonghua Life, Strait Golden Bridge Property & Casualty Insurance, HSBC Life, and Dajia Property & Casualty Insurance.
These capital increases were all subscribed by existing shareholders, demonstrating their confidence in the companies' development. Specifically, Huatai Life plans to raise 970 million yuan through a private placement fully subscribed by its major shareholder, Huatai Insurance Group. Zhonghua Life aims to raise 300 million yuan through a private placement of 240 million shares to Zhonghua Insurance Group and 60 million shares to Zhonghua Property & Casualty Insurance. Strait Golden Bridge P&C plans a 1 billion yuan capital increase subscribed by four major shareholders including Fujian Investment & Development Group. HSBC Life plans a 556 million yuan increase from its sole shareholder, HSBC Insurance (Asia) Limited. Dajia P&C plans to increase registered capital by 1.5 billion yuan, fully subscribed by its current shareholder, Dajia Insurance Group with its own funds.
It is important to note that while capital increases and bond issuance can temporarily alleviate capital and solvency pressures, from a medium-to-long-term perspective, insurers should focus more on enhancing their intrinsic operational capabilities. Continuously optimizing both asset and liability sides is essential for achieving high-quality development.
**Reconsidering Stock-Bond Allocation**
The core of insurance capital asset allocation lies in the strategic deployment between stocks and bonds.
Currently, China's 10-year government bond yield is around 1.76%. Shenwan Hongyuan's research report "Re-examining Insurance Capital Bond Buying Behavior and Market Entry Structure" points out that recent insurance regulatory frameworks have reshaped allocation logic in three areas: duration constraints, market entry, and accounting classification. New asset-liability regulations strengthen matching constraints. Ultra-long-term local government bonds offer both duration and coupon advantages, making their allocation more certain than 30-year government bonds. Participating and universal life insurance products support premium resilience, reducing rigid liability costs, which will continue to drive demand for equity allocation. Under new accounting standards, the allocation appeal of "Tier 2 capital bonds and perpetual bonds" has diminished, with insurers leaning more towards spread trading, limiting the sustained motivation for perpetual bond allocation. Insurers may continue counter-cyclical allocation, closely monitoring signals of a "counter-trend shift to trend," which hold strong indicative value for yield declines.
Regarding stocks, under the new accounting standards, equities are classified under FVTPL (Fair Value Through Profit or Loss), amplifying the impact of stock price fluctuations on reported profits.
In other words, capital market movements now have a more direct impact on insurers' performance. For example, in Q1, amid market volatility, the combined net profit of the five A-share listed insurers fell 16.98% year-on-year to 69.883 billion yuan.
This implies that while responding to policies encouraging "insurance capital entering the market" and "long-term capital, long-term investment," insurance funds must also strategically plan and conduct thorough market research to ensure the security of asset-side returns.
China's low-interest-rate environment is unlikely to change significantly in the short term. The People's Bank of China's Q1 2026 Monetary Policy Execution Report states that the next phase of monetary policy will continue with appropriately accommodative measures, leveraging the combined effects of incremental and existing policies. Promoting stable economic growth and reasonable price recovery are key considerations. The intensity, pace, and timing of policy implementation will be adjusted based on domestic and international economic, financial conditions, and market performance to sustain a suitable monetary and financial environment.
In summary, based on Q1 insurance capital utilization, insurers continue to actively enter the market in response to policy calls. However, they face capital market volatility influenced by unforeseen events, which directly impacts net profits. Finding a better balance between pursuing elastic returns and controlling financial statement volatility has become an unavoidable challenge for the industry. Insurance capital must focus on deep integration between liability characteristics and investment strategies, addressing new-normal profit challenges through enhanced dividend focus, improved trading flexibility, and diversified allocation.
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