CIRC mulls lifting ceiling on payouts for life policies
Move could help reboot premium growth as investors look elsewhere for higher returns
Beijing plans to allow life insurers to pay higher returns on some policies, according to an insider.
That may make the products more attractive to investors frustrated with government limits on bank deposit rates.
The China Insurance Regulatory Commission might scrap the 2.5 per cent maximum rate on fixed-return policies in a trial starting as early as next month, the source said, speaking anonymously. The new rules might prompt insurers to increase their reserves for payouts by about 20 billion yuan (HK$24.9 billion), the person said.
Premium growth has slowed as mainland savers, seeking higher returns, turn to riskier investments such as wealth management products.
Removing the limit on returns may revitalise revenue growth while also channelling savings away from less-regulated investments in the shadow banking sector.
One concern was that allowing higher returns might cause more clients to end their existing policies, the person said.
The forecast for higher reserve needs comes from the regulator's base-case scenario, which predicts redemptions will increase by less than half by value from the present level, according to the person.