The country’s official regulator has established new rules to slow the growth of short- and mid-term products.
Short- and mid-term life insurance products are now subject to new rules in China. These were shared on an official website notice from the Chinese industry regulator, the China Insurance Regulatory Commission (CIRC).
CIRC has been working to be able to reduce the risk associated with the investment into these products.
The CIRC’s concern is that if investments are made into stocks and long term assets using funds based on short-term life insurance, it could cause a sudden sharp capital squeeze. If market volatility should occur, liquidity could tighten sharply. The new regulations state that at the close of the most recent quarter, the annual premiums for short-term and mid-term life insurance products must be smaller than twice the insurer’s net assets or invested capital – whichever is larger.
The regulations for companies selling life insurance products are quite specific to term length.
For instance, the rules go on to say that when it comes to insurance products with terms from one to three years In length, insurance premiums are capped, in a way. That is, they can make up a maximum of half (50 percent) of the total premiums from that insurance company by 2018.
There were also increased payout rates established for both personal care insurance and life insurance. The new rules established a number of regulations with regards to payout rates for a number of different types of coverage products.
The regulations didn’t leave out liability. In fact, several specific forms were identified as being products that can be worked into death insurance. For instance, accidental death liability and disease liability are now forms of insurance coverage that can be included into a broader death insurance product in China.
All the changes that were made with regards to the death and life insurance products and their regulations were released over official channels. These are only the latest in a broad spectrum of changes that have been made in the Chinese insurance market. Rules with regards to selling have been a particular focus in the country over the last several months.