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China: New rules in place to curb short- and mid-term life insurance products

Source: Asia Insurance Review | Oct 2016

CIRC has introduced new rules to curtail short- and mid-term life insurance products. The new rules say that at the end of the latest quarter, an insurance company’s annual premiums from short- to mid-term products should be less than two times the greater of an insurer’s invested capital or net assets. The annual premiums for products with terms of 1-3 years should only comprise 50% of an insurer’s total premiums by 2018, reported Reuters citing a CIRC statement.
 
   CIRC is also capping returns on the products and increasing payouts to policyholders. The maximum guarantee rate of universal life policies is cut by 0.5 percentage point to 3%, and the total payout would depend on the actual investment performance in the universal life account.
 
   The new rules are the latest measures implemented by CIRC since March to curb universal life insurance products. These are typically short-term high cash-value products. The cash generated is often used by insurers to invest in listed equities. CIRC has expressed concern about the risk and asset-liability mismatch.
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