Soochow Securities released a research report stating that on December 19, the National Financial Regulatory Administration solicited public comments on the "Insurance Company Asset-Liability Management Measures" while conducting industry tests. The draft aims to refine regulatory requirements for insurers' asset-liability management amid a new industry cycle marked by significant changes in interest rate environments, product structures, and accounting standards, which have heightened the importance of such management.
The draft represents an enhancement to the existing regulatory framework, strengthening insurers' risk management and ensuring stable industry operations. The firm maintains an "Overweight" rating on the sector, citing continued improvements on both liability and asset sides, with substantial valuation upside remaining.
**Key Revisions in the New Rules:** 1) **Regulatory Alignment:** Responds to the "strengthened asset-liability linkage supervision" requirement under China's third "Ten Guidelines for Insurance." 2) **Management Reinforcement:** Promotes stricter asset-liability management practices. 3) **Accounting Standards Adaptation:** Adjusts metrics to align with the full implementation of new accounting standards by 2026.
**Key Changes vs. 2019 Rules:** The draft consolidates previously fragmented requirements, standardizing governance, accountability, and procedures while introducing clear regulatory indicators emphasizing long-term performance evaluation.
**Quantitative Management Metrics:** 1) **Two Categories:** - **Regulatory Indicators (New):** Minimum standards for P&C (3 metrics) and life insurers (4 metrics). - **Monitoring Indicators:** Mostly retained from current rules (3 for P&C, 7 for life insurers), used for risk identification and early warning.
2) **Specific Regulatory Metrics:** - **P&C Insurers:** - Surplus funds coverage ratio (≥100%) - Income coverage ratio (≥100%) - Liquidity coverage ratio under stress scenarios (≥100%) - **Life Insurers:** - Effective duration gap (range: [-5,5] years) - Comprehensive investment yield coverage ratio (≥100%) - Net investment yield coverage ratio (≥100%) - Liquidity coverage ratio under stress scenarios (≥100%)
3) **Optimized Calculations:** - Adjusted stress scenarios for macroeconomic changes. - Incorporated derivatives' hedging effects into duration calculations. - Extended evaluation cycles for cost-yield metrics to 3–5 years, encouraging long-term operations.
**Sector Outlook:** 1) **Liability Side:** Strong demand persists; lower guaranteed rates + shift to participating policies will optimize liability costs, easing spread loss pressures. 2) **Asset Side:** With 10-year government bond yields at ~1.83%, a recovery in long-term rates amid economic revival could relieve pressure on insurers' new fixed-income investment yields. 3) **Valuation:** Public funds remain underweight on insurance stocks. As of December 19, 2025, sector valuations stand at 0.65–0.95x 2025E PEV and 1.27–2.17x PB, near historical lows.
**Risk Warning:** Sustained declines in long-term rates; weaker-than-expected new policy sales.
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