China’s retail investors grapple with a new investment challenge... the sunset of high-yield insurance products

Chinese retail investors are feeling the chill of a regulatory clampdown on universal life insurance as the high-yielding products they favour are gradually disappearing from offer.

Popular universal life products are essentially high-yield wealth management products that include a life protection component, and usually promise short-term gains with no or minimal penalties for early surrender in the first two years. The practise of selling the policies as a de facto short-term investment products are rare in other markets, analysts said.

In one example, a product from Anbang Insurance Group promises a 4.18 to 4.38 per cent return after two years and charges no fees on early surrender. For many, it works as a two-year maturity fixed-income investment. Meanwhile the one-year savings rate on cash deposits is 1.5 per cent.

“It could be the highest return on the market nowadays,” said Wendy Zhang, a customer manager at a bank offering that markets the product from Anbang Insurance. “Next time you come, you might not get hold of a product with no fees on early surrender of two years.”

She quoted previous returns of 4.7 per cent and contributed the current lower yield to a clampdown from the China Insurance Regulatory Commission, or CIRC.

Other insurance agents say returns offered by investment products are trending lower, marking a shift from those on offer in recent years.