The Financial Regulatory Administration issued a notice to lower the investment risk factors for insurance companies

The Financial Regulatory Administration has issued a notice on adjusting the risk factors related to insurance companies' businesses (the "Notice"), which lowers the risk factors for insurance companies' related business. This adjustment covers three major areas: long-term holdings of CSI 300 index constituent stocks, CNI Dividend Low Volatility 100 index constituent stocks, Sci-Tech Innovation Board common stocks, and the premium and reserve risk of export credit insurance business. Officials from the relevant departments of the Financial Regulatory Administration stated that this move aims to cultivate and strengthen patient capital and support technological innovation. Some analysts believe that the relaxation measures can provide greater space for insurance companies' subsequent investment operations or increasing stock holdings.

Insurance risk factors are capital occupation measurement indicators for insurance companies' investment and operational businesses. In terms of market risk, the higher the risk factor, the more minimum capital is required. According to the "Notice," the risk factors for CSI 300 index constituent stocks and CNI Dividend Low Volatility 100 index constituent stocks held for more than three years will be reduced from 0.3 to 0.27; the risk factor for Sci-Tech Innovation Board common stocks held for more than two years will be reduced from 0.4 to 0.36; the premium and reserve risk factors for export credit insurance business will also be adjusted to 0.42 and 0.545, respectively.

Helping Insurance Companies Increase Market Participation

The head of the Financial Regulatory Administration stated that this measure is aimed at effectively preventing risks, guiding insurance companies to enhance their long-term investment management capabilities, strengthening asset-liability matching management, improving solvency-related standards, and promoting the continuous and stable operation of insurance companies. Lowering stock risk factors is intended to cultivate and strengthen patient capital and support technological innovation; while the reduction of premium risk factors and reserve risk factors is believed to guide insurance companies to increase support for foreign trade enterprises and effectively serve national strategies.

Mainland state media Xinhua News Agency cited analysis indicating that lowering the stock investment risk factors for insurance companies can encourage them to increase their market participation, supporting the stability and activity of the capital market