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October, 28, 2016

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Interest rate environment complicates China's life insurance industry

The life insurance industry in China is facing the critical challenge of a complicated interest rate environment, industry experts warn.

Huang Hong, deputy president of China Insurance Regulatory Commission, pointed out that China's interest rates will stay at a low level, which has an all-around impact on the life insurance industry in terms of pricing mechanisms, business models, investment channels and risk management methods.

He made the comment on October 13 at the China Life Insurance October Qianhai Summit 2016 in Shenzhen, Guangdong province.

The asset size of the insurance industry in China now is 53 times that in 1999, he added, reminding industry players to cope with the low interest rates carefully, otherwise it could become a huge problem.

At the summit, Insurance Association of China released a report about the development of China's life insurance industry.

The report shows China's life insurance companies highly depend on interest margins. Profit brought by interest margins even surpassed some companies' overall profit.

Cui Wei, general manager of a leading global advisory company Willis Towers Watson, said the industry has adjusted their asset allocation during the period of decreasing interest margins.

The proportion of bank deposits and bond assets dropped by 7 and 11 percent respectively, from 2013 to 2015, while equity assets increased from 10 to 15 percent.

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