Insurance funds receive another “shot in the arm”; A-share listed insurers could add up to RMB 78.9 bn in equities

Review of the “Notice on Adjusting Risk Factors for Insurance Companies’ Related Businesses”

The National Financial Regulatory Administration (NFRA) has once again lowered the risk factors applied to equity investments by insurance funds, injecting fresh momentum into their entry into the stock market. After Friday’s close, the NFRA released the “Notice on Adjusting Risk Factors for Insurance Companies’ Related Businesses” (the “Notice”), which stipulates:

1) For CSI 300 constituents and CSI Dividend Low-Volatility 100 index constituents that insurers have held for more than three years, the risk factor is cut from 0.30 to 0.27; the holding period is measured by the weighted-average holding time over the past six years.

2) For ordinary shares listed on the STAR Market that insurers have held for more than two years, the risk factor is reduced from 0.40 to 0.36; the holding period is measured by the weighted-average holding time over the past four years.

3) For insurers’ export-credit insurance business and for the overseas investment insurance business of China Export & Credit Insurance Corporation, the premium risk factor is lowered from 0.467 to 0.42, and the reserve risk factor from 0.605 to 0.545.

Based on static calculations using end-September data, the Notice could free up RMB 78.9 bn of additional equity capacity for A-share listed insurers. The aggregate reduction in risk factors is estimated to release about RMB 20 bn of minimum required capital for these insurers, lifting their core/comprehensive solvency ratios by 1.5/2.1 percentage points on average. If insurers keep solvency ratios unchanged after the adjustment, they could potentially add RMB 78.9 bn to their holdings of CSI 300 constituents (held for >3 years). Company-level breakdown of the potential increase: China Life (RMB 34.5 bn), Ping An Life (16.6 bn), New China Life (10.0 bn), CPIC Life (9.9 bn), PICC P&C (2.8 bn), PICC Life (2.6 bn), Ping An P&C (1.5 bn), CPIC P&C (0.9 bn).

The further cut in risk factors was widely expected; the Notice confirms that facilitating insurance-fund entry into the equity market remains a strategic regulatory priority. At a State-Council press conference on 7 May, NFRA chairman Ji Yunze stated that the authority would “continue to support a stable and active capital market … and further reduce equity-investment risk factors by 10 %.” The Notice delivers on that pledge; the magnitude of the cuts is in line with expectations and, by lowering capital consumption, encourages long-term money to stay invested for the long term. Since 2025, regulators have elevated the strategic importance of insurance-fund participation and have introduced a series of measures to remove bottlenecks, with notable success. As of end-September, insurance funds held RMB 5.59 trn in secondary-market equities (stocks + equity funds), up RMB 1.49 trn from end-2024 and equal to 14.9 % of total investable assets, an increase of 2.6 percentage points. By end-June 2025, the seven listed insurers’ combined secondary-market equity allocation had reached 13.2 %, up 1.5 percentage points from end-2024; their H1-25 equity holdings rose RMB 486.2 bn from the start of the year, exceeding 30 % of H1-25 new-premium inflows (RMB 192.7 bn). Last Friday, People’s Daily published an article by CSRC chairman Wu Qing titled “Improving the Inclusiveness and Adaptability of Capital-Market Institutions”; after the close, the NFRA announced the latest cut in risk factors, signalling that facilitating insurance-fund entry will remain a key regulatory task going forward.

Investment view: We remain constructive on the sector-wide re-rating of Chinese insurers. Looking to 2026, we see four intact positive trends:

1) Continued decline in liability costs for life and P&C insurers;

2) Sustained growth in new-business value (NBV);

3) Ongoing increase in equity allocation by insurance funds;

4) Gradual narrowing of the negative spread.

With long-end rates moving higher and insurance funds steadily increasing equity exposure, we believe asset-side dynamics will remain the key driver of valuation. We recommend China Life (H), Ping An, CPIC, PICC, New China Life and PICC P&C. China Taiping is also worth watching.

Risks: Sharp equity-market swings, falling long-end rates, frequent catastrophes, policy changes larger than expected.