Falling Government Bond Yields Prompt New Round of Life Insurance Rate Cuts

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The annualized financial investment return rate was only 2.24% in China in the first quarter.

Chinese regulators have recently convened a meeting of major life insurance companies to discuss further cuts to predetermined interest rates, according to several market participants.

Since 2023, the life insurance industry has been reducing predetermined interest rates and fees to lower debt costs. Recent discussions indicate that further cuts are on the horizon.

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Chinese regulators are discussing further cuts to predetermined interest rates for life insurance, potentially lowering traditional insurance rates from 3.0% to 2.5%.
Market factors include declining government bond yields and lower investment returns, with insurers' annualized financial return at 2.24% in Q1 2023.
Interest rate cuts may reduce the appeal of life insurance products, with prominent companies reporting negative premium income growth in the first half of 2024.

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Who’s Who

China Pacific Insurance Co. Ltd.: China Pacific Insurance Co. Ltd.'s life insurance unit reported a decline in premium income by 1.23% in the first half of 2024. This decrease is part of a broader trend within the Chinese life insurance industry, which is facing operating pressures due to declining interest rates and subsequent cuts to predetermined interest rates for various insurance products.

New China Life Insurance Co. Ltd.: New China Life Insurance Co. Ltd. experienced an 8.36% decline in premium income in the first half of 2024. This decline is part of a broader trend in the life insurance industry, which is facing pressure due to declining interest rates and reduced returns on investment. The company is expected to continue adapting to these challenging market conditions.

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What Happened When

Since 2023：: The life insurance industry has been reducing predetermined interest rates and fees to lower debt costs.

Less than a year ago：: Previous cut saw rates drop from 3.5% to 3.0%.

In the first half of 2024：: Some large life insurance companies experienced negative premium income growth.

As of June 2024：: The return rate for universal insurance products dropped from about 4% in 2022 to 3%, with more than 60% of products having settlement rates below 3%.