The Zhitong Finance App learned that Shen Wan Hongyuan released a research report saying that the HKMA issued the “Measures for the Management of Insurance Companies' Assets and Liabilities”. The Bank expects that the “Measures” will have a profound impact on insurance capital allocation. Under the influence of the net investment return coverage index, high dividends may become a key direction for increasing second-level insurance benefits, and insurers' attention to the refined management of sub-accounts is expected to increase further. Some of the targets are Shanghai and Shenzhen 300-weighted stocks, which are in a state of significant underbalance, such as changes in market style/reduction in capital concerns, and have strong upward flexibility.
Shen Wan Hongyuan's main views are as follows:
The “Measures for the Management of Insurance Companies' Assets and Liabilities” were officially implemented, and three main adjustments were made compared to the “Draft for Solicitation of Comments”
On August 21, the HKMA issued the “Measures for the Management of Insurance Companies' Assets and Liabilities”. The management goals include term structure matching, cost and benefit matching, liquidity matching, etc., and setting 7 regulatory indicators and 10 monitoring indicators. The “Measures” will be implemented on January 1, 2027, allowing insurers that do not meet the standards to set a three-year transition period. Compared with the “Draft for Solicitation of Comments”, the “Measures” mainly make adjustments in three areas: 1) improving the responsibilities of the board of directors, senior management, and asset liability management departments; 2) optimizing asset liability management policies and procedure requirements; 3) adjusting the calculation caliber of some regulatory indicators.
Term structure matching
Long-term matching restrictions are gradually relaxed on the basis of the “Draft for Solicitation of Comments”. The “Measures” replace the “effective term gap” (± 5 years) in the “Draft for Solicitation of Comments” with the “interest rate risk hedging ratio” (50%-150% range), which relaxes the effective term gap requirements of insurance companies with long periods of debt compared to previous absolute numerical restrictions, and enhances the flexibility of the path to meeting the standards. Since 2021, listed insurers have proactively optimized the maturity structure, moderately lengthened the term of assets and enriched the fixed income asset base by allocating long-term interest rate bonds. It is expected that the implementation of the “Measures” will have no obvious impact on the subsequent long-term debt allocation strategies of leading insurers.
Cost-benefit matching
Under net investment return coverage, high dividends are the key direction of additional allocation. The “Measures” clarify the core regulatory indicators of interest spreads from an official perspective. The regulatory indicators for personal insurance companies include: 1) net investment income coverage ratio: requiring net income to cover rigid debt costs and establish a safe bottom line for interest spreads under a narrow caliber; 2) comprehensive investment income coverage ratio: full-caliber comprehensive income covers the total cost of debt, and measures the company's interest spread performance under the full caliber from the point of view of the essence of operations. Taking 2025 as an example, the net investment return coverage rate of listed companies in the past three years is in the 103%-156% range, but from a medium-term perspective, it is estimated that debt cost optimization is slower than the impact of new capital and maturing reinvestment of existing capital on the net return on investment. It is expected that in the next stage, leading companies may consolidate their dividend income base by adding high-dividend stocks.
Liquidity matching
Focus on short-term payment capacity to maintain the core barrier of business stability. Regulatory indicators are liquidity coverage under stressful situations. Personal insurance and financial insurance companies uniformly implement rigid standards of at least 100%, and measurement rules are linked to the industry's current liquidity risk supervision rules.
Risk warning: Long-term interest rates are declining, equity market fluctuations, the impact of regulatory policies exceeds expectations, and major disasters are frequent.