With the introduction of the new regulations, the differentiated supervision proportion has become the focus of the market. According to the notice, the regulatory proportion of eight equity assets will be determined according to the solvency adequacy ratio, asset and liability management ability and risk status of insurance companies, which can account for up to 45% of the total assets at the end of last quarter.
Which insurance companies will face the adjustment of equity asset ratio? How will the implementation of the new regulations affect the market?
According to the previous regulations, the proportion of equity investment of insurance companies will follow the upper limit of 30%. However, the new rules change the previous one size fits all requirement. According to indicators such as solvency adequacy ratio, asset liability management ability and risk status of insurance companies, the regulatory proportion of equity assets will be divided into eight grades, up to 45% of the total assets at the end of last quarter.
In view of the irrational behaviors such as blind investment, excessive investment caused by investment impulse and frequent card raising, etc., the circular further stipulates that the total number of shares invested by an insurance company in a single listed company shall not exceed 10% of the total share capital of the listed company on the basis of the existing concentration index, unless otherwise stipulated by the CIRC or approved by the CIRC.
Correspondingly, the potential incremental capital into the market will be greatly increased. According to the data of CBRC, the balance of equity assets utilization of insurance companies at the end of the first quarter of 2020 was 4.38 trillion yuan, accounting for 22.6% of the balance of insurance funds utilization and 20.19% of the total assets of insurance companies.
Tianfeng securities is based on the notice on the longer-term incremental capital estimates. Assuming that the utilization balance of insurance funds will increase by 10% every year in the next three years, and the proportion of equity categories under the new regulations will be increased to 24%, 26%, 28% and 30%, respectively, then in theory, the annual incremental funds of the stock market will be 290 billion yuan, 370 billion yuan, 450 billion yuan and 530 billion yuan.
Liu tingjun, President and chief operating officer of Taikang Insurance Group, said that the cbcircs regulations on optimizing the allocation of equity assets of insurance companies can, on the one hand, give better play to the advantages of long-term and value investment of insurance funds and support the real economy. On the other hand, this relaxation has a very creative approach. The relaxed ratio is managed differently according to the solvency of insurance companies, which is also conducive to controlling potential risks. With the relaxation of investment proportion and policy adjustment, insurance funds can more actively participate in the growth and cultivation of new economic momentum, and promote the high-quality transformation and development of economy.
More than 70 companies can increase equity investment ratio
After the release of the notice, the relevant person in charge of the CIRC said that some insurance companies need to implement a lower proportion of equity assets supervision. Judging from the existing asset allocation of these companies, there are not many companies actually involved in the scale reduction.
It is worth noting that the notice has set up a more flexible transitional period: first, if the existing investment exceeds the prescribed allocation ratio, it shall be gradually adjusted in place within 12 months; if it exceeds the concentration ratio, it is not allowed to increase relevant investment, but it is not necessary to sell it. Second, for insurance companies in risk disposal, the CIRC will comprehensively consider the companys actual situation and external environment, and formulate a more stable proportion adjustment and transition period arrangement plan according to the principle of one company, one policy, so as to handle the insurance companies in a stable and orderly manner.
Which insurance companies are about to face adjustment?
According to the solvency report of 181 life insurance companies, property insurance companies and reinsurance companies in the first quarter of 2020 and the annual financial report of 2019, Shen wanhongyuan estimates that the upper limit of equity investment ratio can be increased by 73 companies, maintained by 42 companies, and decreased by 66 companies, of which 1 company is not allowed to add equity asset investment.
According to the notice, companies with a comprehensive solvency adequacy ratio of less than 200% will be reduced to the upper limit of equity allocation. According to the statistics of economic observer, the comprehensive solvency adequacy ratio of most companies in the first quarter of 2020 is between 150% and 200%, that is, many companies need to reduce the upper limit of equity investment ratio to 25%.
Based on the solvency adequacy ratio report of insurance companies in the first quarter of 2020, the reporter found that the equity investment ratio of 33 life insurance companies, including Ruihua health, Huagui life insurance and Dehua Angu life insurance, and 14 property insurance companies, including Fubang property insurance and Yian property insurance, had an upper limit of 25%. In addition, 15 life insurance companies including Lian life insurance company, Xintai life insurance company, Hongkang life insurance company, Zhongrong life insurance company, Huaxia life insurance company, Evergrande life insurance company, Fude life insurance company, Shanghai life insurance company, Bohai property insurance company and China coal property insurance company are included in the first quarter of 2020. The upper limit of equity investment ratio of these companies is 20%. In addition, China France life, which ranked last in the comprehensive solvency adequacy ratio in the first quarter of 2020, will be required to reduce the upper limit of equity allocation to 15%.
The signal effect is obvious
In fact, the regulatory authorities have repeatedly voiced their voice to encourage insurance capital to enter the market. In the guiding opinions on promoting the high-quality development of banking and insurance industry issued by the CIRC at the beginning of the year, it is clearly pointed out that bancassurance institutions should play an important role in optimizing the financing structure.
From the policy point of view, the equity investment of insurance funds has been adjusted several times. In August 2010, the CIRC issued the Interim Measures for the management of insurance fund utilization, which stipulates that the upper limit of equity investment proportion of insurance enterprises is 20%. In February 2014, the CIRC issued the notice on strengthening and improving the supervision of insurance fund utilization proportion, adjusting the upper limit of equity investment proportion of insurance enterprises to 30%. After the new regulation was issued, the proportion was increased again to 45% and differentiated supervision was implemented Tube.
The reporter of economic observer has made statistics on the proportion of equity investment of head insurance enterprises in recent years. From the data, after the regulations were issued in 2010 and 2014, the proportion of equity assets allocation of insurance enterprises has increased to a certain extent, but the high value of the proportion has been below 20%. The data shows that from 2014 to 2019, the proportion of insurance industry stock + securities investment fund was 11.06%, 15.18%, 13.28%, 12.3%, 11.7% and 13.15%, respectively. If the long-term equity investment is added together, the average level of equity investment in the insurance industry will be about 20%.
Industrial Securities analyst Zhang Bo said that because the actual rate of return on fixed income assets of insurance companies can generally reach more than 4%, it is easier to meet the long-term investment yield assumption of 5%, so the company has less incentive to increase investment risk and allocate equity assets. Therefore, even if the new rules will increase the allocation upper limit, companies will not significantly increase equity assets in the short term.
CICC analysts said that in the operation of insurance companies, the real limit to determine the proportion of stock allocation comes from the solvency regulatory system (solvency regulation requires higher risk capital requirements for stock assets), rather than the upper limit of equity investment supervision proportion. The current data shows that by the end of the first quarter of 2020, the average comprehensive solvency adequacy ratio and the average core solvency adequacy ratio of the industry are 245% and 234%, respectively, which means that the actual equity asset ratio of the industry is within the original 30% regulatory upper limit. Therefore, without significantly changing the solvency of the industry, the actual impact of the new regulation on the stock allocation of most insurance companies is limited Regulation is also not the same as insurance funds to add stocks, said CICC analysts. The basic characteristics of Chinas strong economic resilience and large policy space have not changed. The logic of the long-term improvement of the domestic stock market continues to strengthen. It will always focus on equity market opportunities, but it is difficult to make decisions immediately in the short term, said an insurance investor. After all, investment requires real money and silver to be responsible for its own profits and losses. Different insurance companies may adopt different strategies according to their own conditions.
According to Zhang Bo of Societe Generale Securities, from the perspective of ultra long-term logic, according to the experience of developed insurance markets, with the long-term downward trend of 10-year Treasury bond yield, increasing equity assets and overseas assets (mainly overseas equity assets and emerging market bonds) is a long-term trend. The new regulation has raised the upper limit of equity asset allocation of most listed insurance companies, and may reduce the markets worries about the advantages and disadvantages of the downward yield of 10-year Treasury bonds on the investment side of insurance enterprises.
Source of this article: Yang Qian, editor in charge of the Economic Observer_ NF4425