China has implemented a series of policy changes aimed at giving insurers greater flexibility in their investment portfolios.
These changes include higher equity exposure allowances and the addition of gold as a permissible asset class, signalling a broader effort to steer long-term institutional capital toward stabilising the domestic economy.
China’s National Administration of Financial Regulation (NAFR) confirmed that insurers’ equity investment thresholds will now scale based on solvency adequacy ratios.
Firms reporting a ratio below 100% remain restricted to investing no more than 10% of their total assets in equity-type assets. However, those with higher ratios will see increased caps: up to 20% for ratios between 100% and 150%, and up to 50% for companies whose ratios exceed 350%.
In addition, insurers will be permitted to invest in venture capital funds up to 30% of the fund’s paid-in capital, according to book value.
In its announcement, NAFR said the rule changes are intended to optimise capital deployment and enhance the long-term investment capabilities of insurers.
NAFR also underscored that all investments must continue to comply with core principles of risk management, such as liquidity, safety, and alignment with liabilities. Insurers are expected to strengthen their monitoring, reporting, and analysis of risk and return profiles.
Additionally, China has launched a pilot program permitting select insurers to invest in physical gold.
Ten companies, including China Life Insurance Co and PICC Property & Casualty Co, can now allocate up to 1% of their assets into bullion. This change could lead to as much as 200 billion yuan flowing into the gold market, according to projections by Minsheng Securities.
While gold does not generate income in the traditional sense, analysts at Guotai Junan Securities said the metal serves as a valuable diversification tool in periods of market uncertainty.
However, gold allocations by insurers may roll out gradually.
“We are more likely to see accumulations when price rallies take a pause,” said Yuxuan Tang, a global market strategist at JPMorgan Private Bank.
The new investment framework arrives at a time of intensified trade friction between China and the US, a backdrop that has prompted authorities in Beijing to take measures to support market confidence and stimulate economic activity.
In recent months, insurers have been directed to allocate a portion of new premiums toward domestic equities, further integrating insurance capital into national financial planning.
Amid trade issues between the two countries, Fitch Ratings has revised the credit ratings of six Chinese insurance firms – this follows a downgrade of China’s sovereign rating.
On April 3, Fitch lowered the country’s Long-Term Foreign-Currency Issuer Default Rating from “A+” to “A,” prompting a reassessment of insurers tied closely to state ownership or support.
Five insurers saw their ratings downgraded, while China Life’s rating was affirmed. Fitch attributed the downgrades to reduced expectations of government backing in the face of mounting fiscal and economic pressures.
China Life’s rating, according to Fitch, is largely based on standalone credit strength and was not materially affected by its 64% sovereign investment-to-capital ratio reported at the end of 2024.
Looking ahead, the ratings agency indicated that further changes could depend on developments in China’s sovereign credit status, shifts in ownership structures, or performance in key financial metrics.
