China loosens grip on life insurance interest rates

Monday, 5 August 2013 00:00 - - {{hitsCtrl.values.hits}}

Reuters: China’s insurance regulator has loosened the cap on interest rates offered on life insurance policies, marking another incremental step towards liberalising interest rates throughout the financial system. The People’s Bank of China removed controls on bank lending rates last month in a long-awaited move that signaled Beijing’s determination to push on with market-oriented reforms even as economic growth slows. The upper limit of 2.5% on pre-determined rates for standard life insurance products will be eliminated, according to a notice published on Friday on the website of the China Insurance Regulatory Commission. The 2.5% cap will remain in effect for dividend-type and universal-type life insurance products. But the new regulations also institute a new legally-mandated reserve requirement assessment rate at 3.5% for life insurance products, which will indirectly influence the interest rates that insurers can offer on policies. The new regulations take effect on 5 August, but insurance policies issued before that date remain subject to the previous caps. China’s life insurance companies held assets of 6.54 trillion yuan ($1.07 trillion) at the end of June, official industry data shows. Among the country’s top insurers are China Life Insurance Co Ltd, the world’s biggest insurer by market capitalisation, Ping An Insurance Group Co and New China Life Insurance Co.

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