The Zhitong Finance App learned that Dongwu Securities released a research report saying that the implementation of the new regulations is conducive to improving the risk management level of insurers and ensuring the steady operation of the industry. The bank expects that after the implementation of the new regulations, insurance companies will pay more attention to the importance of asset liability management. At the same time, guided by major regulatory indicators, it is possible to improve overall asset balance matching performance by increasing the transformation of floating income businesses, increasing the allocation of long-term fixed income assets and high-quality high-dividend equity assets.
The main views of Dongwu Securities are as follows:
New regulations on asset liability management for insurance companies have been officially implemented and will be implemented from 2027
On August 21, the Financial Supervisory Authority issued the “Measures for the Management of Assets and Liabilities of Insurance Companies”, which comprehensively standardize and supervise the asset liability management of insurance companies in terms of governance structure, policies and procedures, supervision indicators and monitoring indicators, and will be officially implemented on January 1, 2027. For insurers that do not meet regulatory standards, a three-year transition period is permitted.
Compared with the draft for solicitation of comments, the “Measures” have made adjustments to the governance structure, policy procedures, and supervision and monitoring indicators
1) Governance structure: ① The responsibility of senior management to review or approve asset liability management systems has been added. ② The workflow for transactional arrangements such as how often the Asset Liability Management Committee listens to reports has been simplified. ③ The statement of responsibilities of the asset liability management department has been improved, and the department formation method has been changed from the previous “settings” to “set up or designate”. 2) Policy procedures: ① Requires that changes in the balance between balance and liability situations be taken into account in business planning and product development. ② In the entrustment investment relationship, it is clear that the client provides the trustee with necessary information such as long-term goals, return on investment requirements, and changes in cash flow expectations. ③ Retrospective analysis of the deviation between the expected allocation ratio and the actual allocation ratio is taken into unified consideration in the deviation backanalysis between the expected return on investment and the actual return on investment. 3) Regulatory and monitoring indicators: ① Replace long-term gap indicators with interest rate risk hedging rates to more intuitively reflect the degree of hedging of interest rate risk on assets and liabilities. ② Improve the calculation caliber of deposit capital coverage, comprehensive investment income coverage, and liquidity coverage indicators. ③ The effective long-term gap index is adjusted to a monitoring indicator to replace the corrected long-term gap index.
The new regulations put forward the requirements for 3 financial insurance companies and 4 regulatory indicators for life insurance companies
1) Financial insurance companies: ① Coverage of deposited capital = settled capital/medium- to long-term assets. ② Revenue coverage = (income from insurance services+comprehensive return on investment) /comprehensive cost. ③ Liquidity coverage. None of the above three indicators should be less than 100%. 2) Life insurance companies: ① Interest rate risk hedging rate = cash flow inflow interest rate sensitivity/cash outflow rate sensitivity. The minimum regulatory standard is between 50% and 150%; for personal insurance companies with an interest rate risk hedging rate of less than 50%, the cash flow inflow interest rate sensitivity is not less than 5%. ② Comprehensive investment return coverage = comprehensive investment income/debt capital cost. ③ Net return on investment coverage = net return on investment/guaranteed cost of debt. ④ Liquidity coverage. The latter three indicators must not be lower than 100%.
Risk warning: long-term interest rate trend downward, equity market fluctuations, new order growth falls short of expectations