China: Reduced capital charges to spur Chinese insurers' equity investments
Source: Asia Insurance Review | Jun 2025
China’s reduction in capital charges for equity investments by insurers is likely to drive them to increase their equity holdings, Fitch Ratings says.
The State Council Information Office on 7 May said the capital charge for equity investments used to calculate the solvency ratio will be reduced by 10%, which decreases capital requirements for insurers. The change follows previous policies that eased equity investment limits and initiated long-term investment pilot programmes.
Life insurers’ equity investments, which include stocks and long-term equity investments, comprised 15.3% of invested assets, while that of non-life insurers accounted for 13.5% at end-2024. Fitch expects this portion to increase, driven by regulatory guidance and China’s persistently low interest rates.
However, Fitch does not expect non-life insurers to substantially raise their equity asset due to short liability durations that require higher liquidity. Some life insurers already hold large equity investments and there is limited room for increasing this portion even with policy encouragement.
Fitch expects insurers’ solvency ratios to remain stable in the short term, aided by the 10% cut in capital charge on equity investments. However, it thinks that insurers’ capital buffers will continue to be under pressure as the companies try to sustain business growth while their financial performance may be more volatile over the long term given the potential increase in equity assets which would expose earnings to the swings in the stock market. A