HONG KONG--(BUSINESS WIRE)--Recent regulatory measures intended to create stricter oversight on savings-type life insurance in China will add to already-existing industry pressures, according to a new A.M. Best briefing.
The new Best’s Briefing, titled “Savings-Type Life Insurance Business Under Stricter Regulatory Oversight And Intervention in China,” notes that the savings-type life insurance business with minimum guarantees has grown rapidly amid volatile equity markets and falling interest rates. A.M. Best believes this growth exposes life insurance company capital to greater risks.
In March 2016, the Chinese Insurance Regulatory Commission (CIRC) ordered life insurance companies to stop offering one-year term-savings-type life insurance business and mandated curbed sales on one-to-three-year term-savings-type life insurance business sales over a three-year period.
In mid-August, the CIRC rolled out additional supervisory measures focused on universal life business interest margins, as intense competition in China’s life insurance market has seen medium- and small-size life insurance companies offer higher interest rate guarantees in universal life products in order to increase their market share. In September 2016, CIRC also lowered the threshold guaranteed minimum interest rate that requires mandatory regulatory approval to 3% from 3.5%.
A.M. Best notes that these regulatory actions are part of the growing pains of a fledgling marketplace. However, the depressed interest rate environment could pressurize the profitability and capitalization of life insurers. To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=254304.
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