China Merchants Securities has released a research report indicating that, overall, the finalized version of the new insurance company asset-liability management regulations has relaxed certain regulatory hard constraints, strengthened monitoring and early warning mechanisms, and introduced more flexible governance and policy procedures, with a notably more pronounced easing of pressure on small and medium-sized insurers. Simultaneously, the regulations refine the calculation basis for certain regulatory indicators and reinforce constraints on cost-return and duration matching. Demand for high-dividend assets and long-duration bonds is expected to persist, with limited near-term impact on insurer investment strategies anticipated. The firm maintains a recommended rating for the insurance sector.

On August 21, the National Financial Regulatory Administration officially issued the "Measures for the Asset-Liability Management of Insurance Companies," effective January 1, 2027, delayed by six months from the originally proposed timeline in the draft for comments. Against the backdrop of low interest rates, new accounting standards, and capital constraints, the Measures consolidate requirements previously scattered across interim provisions and five regulatory rules, aiming to align policy frameworks and strengthen asset-liability management discipline within the industry, likely exerting a profound influence over time.

Compared to the draft version published in December 2025, the finalized Measures primarily refine the calculation methodology for certain regulatory indicators and explicitly permit a three-year transition period for insurers that temporarily fail to meet these indicators. Additionally, the requirement for a dedicated asset-liability management department has been adjusted from "must establish" to "may establish or designate." Overall, these adjustments ease regulatory rigidity, enhance monitoring and early warning, and provide greater flexibility in governance and policy procedures, delivering more substantial relief to smaller insurers.

The finalized Measures establish four regulatory indicators for life insurance companies: interest rate risk hedging ratio, comprehensive investment return coverage ratio, net investment return coverage ratio, and liquidity coverage ratio, each with minimum regulatory standards and strengthened limit management. Specifically, the interest rate risk hedging ratio, replacing the former effective duration gap indicator, is calculated as the sensitivity of cash inflows to interest rates divided by the sensitivity of cash outflows, with a minimum standard set between 50% and 150%; for companies with a ratio below 50%, the sensitivity of cash inflows must be no less than 5%. The comprehensive investment return coverage ratio, defined as the past five-year comprehensive investment return divided by the past five-year liability funding cost, must meet a minimum standard of 100%, with comprehensive investment return adjusted to exclude fair value changes of FVOCI debt instruments. The net investment return coverage ratio, calculated as the past three-year net investment return divided by the past three-year guaranteed liability cost, also requires a minimum of 100%, with net investment return including interest income from FVTPL financial assets and deducting interest expenses. The liquidity coverage ratio, removing the "under stress scenarios" qualifier, maintains a minimum standard of 100%, consistent with existing liquidity risk regulations.

Regarding equity investments, the Measures impose quantitative requirements on insurers' ability to cover liability costs through investment returns. Interest income within net investment return faces significant pressure in the current low-rate environment, with listed insurers experiencing an average annual decline of approximately 30 basis points in net investment yield, primarily due to reduced interest contributions. Dividend income has emerged as a critical alternative, given that the current dividend yield of the CSI Dividend Index stands at 4.3%, substantially higher than the roughly 1.7% yield on 10-year government bonds. High-dividend assets are therefore likely to remain a key allocation focus for insurers.

For bond investments, the long-term structural demand persists. The Measures require insurers to maintain reasonable duration matching, but do not mandate an absolute duration gap of zero, which would otherwise sacrifice risk-return trade-offs. Listed insurers currently manage duration effectively and face fewer constraints on bond allocation, shifting from a purely passive "buy whenever funds are available" approach to incorporating more tactical timing considerations. Non-listed insurers, however, generally encounter greater pressure; even with eased regulatory indicator definitions, they must continue extending asset duration, with increased allocation to ultra-long government bonds and local government bonds remaining the most critical avenue. Given the three-year transition period, the near-term impact on industry asset allocation is expected to be minimal.

Risks to consider include economic growth falling short of expectations, regulatory tightening, declining product attractiveness, capital market volatility, declining interest rates, and an increased frequency of major disasters.