Key Milestones in 2025

1. 10 January: Release of the Circular on Establishing a Mechanism Linking Assumed Interest Rates to Market Rates and Enabling Dynamic Adjustments to Assumed Interest Rates, which implements a dynamic adjustment mechanism for the assumed interest rates of life insurance products.

2. 17 January: The Measures for the Supervisory Ratings of Insurance Companies established a unified regulatory rating system covering different types of insurance institutions.

3. 22 January: The Implementation Plan on Driving Market Entry of Medium- to Long-Term Capital guided insurance funds to increase their allocations to the A-share market.

4. 1 March: The Circularon Matters Related to Hong Kong and Macao Financial Institutions’ Equity Investments in Insurance Companies lowered the market access threshold for Hong Kong and Macao financial institutions to make equity investment in insurance companies.

5. 2 April: The Circularon Matters Related to Major Equity Investments by Insurance Funds in Unlisted Companies reshaped the regulatory framework for major equity investments by insurance companies.

6. 2 April: Release of the revised Measures for Consolidated Supervision of Insurance Groups, strengthening comprehensive risk management for insurance group companies.

7. 3 April: The Circularon Strengthening the Supervision of Universal Life Insurancepermitted reasonable adjustments to the minimum guaranteed interest rates of universal life insurance products.

8. 11 July: Release of theAdministrativeMeasures for the Product Suitability Management of Financial Institutions, which explicitly brought insurance products into the suitabilityregulatory framework.

9. 2 September: The National Financial Regulatory Administration (“NFRA”) issued a circular supporting domestic insurance companies to offload insurance risks in the Hong Kong market by issuing insurance-linked securities.

10. 30 September: Release of the Notice on Matters Related to Strengthening Non-Auto Insurance Business Supervision, extending the "Bao Xing He Yi" (报行合一,literally translated as Filing-Implementation Consistency) regime to the non-auto property and casualty insurance sector, following its earlier implementation in auto and life insurance sectors.

11. 26 November: The Insurance Asset Management Association of China was renamed the Banking and Insurance Asset Management Association of China ("BIAMAC"), to push forward the development of synergies between asset management businesses in the insurance and banking sectors.

12. 22 December: The Administrative Measures for the Information Disclosure of Asset Management Products of Banking and Insurance Institutions aligned the disclosure requirements applicable to asset management products in the insurance, banking and trust sectors.

Key Regulatory Review in 2025

1.  Equity allocation surges as regulation balances prudence with flexibility

Following the release of the guiding opinions on the market entry of medium- to long-term capital in 2024, the year 2025 opened with six government bodies including the Central Financial Commission jointly issuing theImplementation Plan on Driving Market Entry of Medium- to Long-Term Capital. The implementation plan provides specific guidance on the strategy of "long-term funds for long-term investment" Large state-owned insurers have been directed to increase both the scale and share of their A-share investments. They are also expected to adjust the timeframe and weighting of their performance appraisals. NFRA's supportive policies followed in quick succession. In March, the investments under the first batch of insurance funds' long-term equity investment pilot scheme were launched, with a total quota of RMB 50 billion; the scheme continued to expand throughout the year. In April, the regulator raised the cap on insurers' permitted equity asset allocation. In December, it further lowered the risk factors for constituent stocks of the CSI 300 Index, the CSI Dividend Low Volatility 100 Index, and STAR Market-listed stocks, thereby freeing up additional capacity for incremental capital inflows into the market.

The implementation plan reaffirmed, on the basis of the guiding opinions, the eligibility of insurance funds to participate as strategic investors in private placements by listed companies. The China Securities Regulatory Commission (“CSRC”) promptly started to develop implementation rules. According to the relevant consultation draft, strategic investors are, in principle, required to subscribe to no less than 5% of the listed company’s total share capital post-issuance, and the nominated directors shall substantively participate in corporate governance.  Insurance funds may invest as strategic investors through direct investments, entrustment mandates, or equity investment schemes issued by an affiliated insurance asset management company where the insurance fund is the sole investor. Against the backdrop of falling bond yields and asset shortage, the opening of the private placement channel is likely to be welcomed by the market. However, how to prevent the use of financial engineering to generate short-term profit increases, and identifying the real patient capital remain key challenges for the next phase.

Beyond public markets, the private equity sector saw a surge in participation from insurance funds, including the emergence of several RMB 10 billion funds. The 2025 regulatory framework reflected a dual approach of both loosening and tightening. In April, NFRA issued the Circular on Matters Related to Major Equity Investments by Insurance Funds in Unlisted Companies, imposing new requirements on such investments. The circular expands the scope of permissible industries for major equity investments, guiding insurance funds toward strategic emerging sectors such as technology enterprises and big data. At the same time, it closes several loopholes that could facilitate improper interest transfers. It requires that control previously exercised through SPVs, funds, and trusts be identified on a look-through basis as major equity investments, with rectification to be completed within a five-year transition period in principle. Nevertheless, several practical implementation issues remain to be clarified, including distinguishing between subsidiaries and SPVs, defining separately managed accounts for insurance funds, and the process of filing for approval for projects that are identified as controlled investments on a look-through or consolidated basis.

2. Unified rules for banking, insurance and trust asset products; value of insurance asset management licenses enhanced

In November, the Insurance Asset Management Association of China was formally renamed BIAMAC. The association included wealth management subsidiaries of banks (also regulated by NFRA) as its members. The renaming reflects a growing alignment of regulatory standards between the insurance and banking asset management sectors. In practice, this "same business, same standards" integration also extends to the asset management activities of trust institutions.

In December, NFRA issued the Administrative Measures for the Information Disclosure of Asset Management Products of Banking and Insurance Institutions,  which will take effect on 1 September 2026. The measures bring insurance asset management products, bank wealth management products, and trust asset management products under a unified information disclosure framework. Under this framework, BIAMAC and the China Trustee Association, in collaboration with China Trust Registration Co., Ltd., Banking Credit Assets Registration and Transfer Center Co., Ltd., and China Insurance Assets Registration and Trading System Co., Ltd., will develop self-regulatory rules tailored to the characteristics of each product type.  

Disclosure obligors are now required to take a more proactive approach in looking through to underlying assets. For material event disclosures, the measures substantially elaborate on the previously general requirement of being "timely and adequate," providing greater specificity on what must be disclosed and when.

On the custody front, the Measures for the Management of Custody Business of Commercial Banks (Trial), also issued in December, unify custody requirements across various financial products, including insurance asset management products. These measures emphasize the independence of custodian banks, introduce mandatory contractual clauses, and strengthen the custodian banks' obligations in supervision and review.

In recent years, as multiple wholly foreign-owned entities have successively received market entry approval, insurance asset management has emerged as a key focus of insurance sector liberalization. Beyond their product issuance and asset management capabilities, insurance asset management companies may, in the future, explore setting up private fund managers or acquiring other licenses. In the current environment, with insurance funds being actively allocated to equity assets, the functional value of these institutions has been further enhanced.

3. Dynamic adjustment to product interest rates accompanied by renewed focus on compliance with filings made

In January, the Life Insurance Department of NFRA issued the Circular on Establishing a Mechanism Linking Assumed Interest Rates to Market Rates and Enabling Dynamic Adjustments to Assumed Interest Rates, which clarifies the specific operational details of the dynamic adjustment mechanism for assumed interest rates. Under this mechanism, the Insurance Association of China will publish quarterly reference rates for assumed interest rates. These rates are determined based on fluctuations in key market benchmarks such as the Loan Prime Rate, deposit rates, and government bond yields, as well as the industry's asset-liability management profile.  Where a product's assumed interest rate deviates beyond a prescribed threshold over a sustained period, insurers are required to adjust the applicable ceiling either upward or downward, as appropriate. In contrast to the previous one-size-fits-all approach, this dynamic mechanism enables more timely calibration of interest rate levels, granting institutions greater autonomy while reinforcing their responsibility for prudent pricing.

In April, NFRA issued the Circular on Strengthening the Supervision of Universal Life Insurance, permitting insurers to set a time limit for the minimum guaranteed interest rate of universal life insurance, after which the rate may be reasonably adjusted. As one of the few financial products capable of offering a " guaranteed return", universal life insurance was once marked a short-term wealth management tool. However, the high guaranteed rates embedded in these products have created significant liability pressure for insurers. This circular provides insurers with a mechanism to adjust rates, which could, to some extent, alleviate asset-side allocation pressure.  The key question remains: how will consumers respond at the end of the guarantee period, and how will insurers manage the transition? The responses will ultimately be tested by the market over time.

"Bao Xing He Yi" (literally translated as Filing-Implementation Consistency), which further deepened and intensified in 2025, served as another effective tool for cost reduction and efficiency improvement in the insurance sector.  Building on this principle, the NFRA guided the China Association of Actuaries to release the China Life Insurance Mortality Table in October, followed by the Guidelines on Expense Allocation for Life Insurance Products in November.  These documents lay out clear guidance for life insurers on product pricing, expense recognition, and cost allocation. By doing so, they sharpen the toolkit for implementing "Bao Xing He Yi" in the life insurance sector.

In mid-2025, NFRA issued the Notice on Matters Related to Strengthening Non-Auto Insurance Business Supervision and the Working Guidelines on Strengthening Non-Auto Insurance Business Supervision, kicking off the expansion of "Bao Xing He Yi" to the non-auto insurance sector. "Non-auto insurance" here principally covers all property and casualty insurance business outside of auto insurance. The new rules require all existing products be re-filed within a specified timeframe. Under the updated filing requirements, the maximum rate for each coverage item must be clearly specified, and assumed supplementary expense rates are not permitted to exceed a uniform ceiling. The regulations also emphasize the principle of "Jian Fei Chu Dan" (literally translated as Premium Receipt before Policy Issuance), requiring P&C insurers to issue policies and invoices only after premiums have been collected.

However, given the wide variety of products and the complexity of circumstances in the non-auto insurance sector, implementation proved challenging. In response, on the last day of 2025, NFRA issued the Q&A on Non-Auto Insurance Comprehensive Governance (No. 1) to provide clarity on outstanding issues. Notably, the Q&A excluded standalone short-term health and accident insurance from the application scope, and also clarified the specific application of "Jian Fei Chu Dan" across different lines of business.

The regulatory logic underlying "Bao Xing He Yi" has evolved beyond pure cost containment to encompass a broader strategic objective. By strengthening rate implementation, optimizing performance assessment mechanisms, and regulating premium income management, the framework is designed to steer insurers away from pure scale expansion toward a strategic focus on quality, efficiency, and differentiation.

4. Foreign investors ramp up commitments as preferential policies for Hong Kong and Macao take hold

At the 2025 Lujiazui Forum, Li Yunze, Chairman of NFRA, observed that nearly half of the world's 40 largest insurance companies have now entered the Chinese market. He also noted that the premium market share held by foreign-invested insurers in China has grown from 4% in 2013 to 9% today.

The year 2025 witnessed a further strengthening of the insurance industry's international engagement, driven by a steady flow of opening-up policies and practical cooperation. Among the key developments, Starr was authorized to complete its full acquisition of Starr P&C Insurance (China); Fosun United Health and Taiping Pension welcomed new foreign investors; Cardif Airstar Property & Casualty received approval to commence operations; and the integration of Chubb and Huatai P&C Insurance progressed significantly. In a notable trend within the asset management sector, AIA and Aegon each obtained an insurance asset management license, following in the footsteps of Prudential Financial. Reinforcing this momentum, multiple foreign institutions, including HSBC, Generali, ERGO, AIA, Prudential, and AXA, made fresh capital injections into their Chinese subsidiaries and ventures. Ultimately, while each institution pursued its own strategic path, these tangible investments all signaled a shared, long-term commitment to the Chinese market.

On the policy front, NFRA issued the Notice on Matters Related to Hong Kong and Macao Financial Institutions’ Equity Investment in Insurance Companies in February, which removed the previous USD 2 billion total asset requirement for Hong Kong and Macao financial institutions investing in mainland insurers. This amendment, aligned with the 2024 revisions to the Closer Economic Partnership Arrangement (CEPA), paves the way for greater cross-border capital flows and stimulates interest in mainland insurance licenses. In August, NFRA followed up by revising the Measures for the Management of Capital Guarantee Deposits of Insurance Companies, permitting Hong Kong and Macao-funded banks to act as depositories for mainland insurers' capital guarantee deposits. This change facilitates closer ties between domestic insurance funds and banks in Hong Kong and Macao, further cementing the foundation for business connectivity within the Greater Bay Area.

5. Innovations in resolving institutional risks; intermediary clean-up normalized

The Measures for the Supervisory Ratings of Insurance Companies, formally issued in early 2025, largely build upon the previous rating framework for life insurers. Companies undergoing restructuring, regulatory takeover, or market exit are classified under a dedicated Grade S. Notably, under the new regime, the threshold for identifying high-risk institutions (Grade 5) has been lowered from a score of 60 to 45, and the accompanying risk resolution measures have been upgraded from optional to mandatory.

Under the current regulatory framework, investments in insurers undergoing risk resolution may benefit from certain exemptions, such as relaxed shareholder qualification requirements and lifted investment quantity restrictions. However, an ambiguity persists: the conditions that officially place an insurer into the "risk resolution" phase have never been clearly defined, and in practice, regulatory takeover has not been a rigidly applied precondition.

The new rating system now offers certain quantitative grounds for placing insurers into risk resolution, though their application in practice will inevitably require a holistic judgment. Detailed risk resolution guidelines are anticipated to be introduced in the future to standardize the processes, mechanisms, and key considerations for regulatory intervention.

In 2025, the insurance industry saw innovation in the pathways as well as responsibility allocation of risk resolution. The year witnessed the establishment of Fuze Life Insurance, a venture initiated by Shandong local state-owned capital together with the Insurance Security Fund and PICC Asset Management, to take on the insurance business of Junkang Life Insurance. In a parallel development, Dongwu P&C Insurance, backed by Suzhou local state-owned capital, successfully acquired a defined portfolio of assets from Anxin P&C Insurance. Both instances represent a move away from the conventional reliance on the "territorial responsibility" model towards “entrusting the best”, sending a positive signal to the market.

Substantial progress was also made in the "clean-up and quality enhancement" of the insurance intermediary market. NFRA data reveals that from 2024 to 2025, a total of 3 intermediary groups, 57 professional intermediary legal entities, 3,730 professional intermediary branches, and 226 concurrent-business agencies had their licenses revoked or were deregistered. This cleanup effort, coupled with market structure optimization and the implementation of reforms such as "Bao Xing He Yi," has driven the valuation of intermediary licenses back to more rational levels. Although this has led to a noticeable cooling in M&A activity, it should not be mistaken for a loss of interest. For strategic investors, rather than a downturn, this could be a valuable window for preparing their business positions.

In June, NFRA issued a draft of the Interim Provisions on the Management of the List of Seriously Dishonest Entities for public consultation. The draft establishes a regulatory "blacklist" that could include legal entities whose licenses have been revoked, as well as shareholders of financial institutions found to have abused their rights or neglected their duties. Once included, such problematic institutions and non-compliant shareholders could face more severe consequences and greater liabilities upon exiting the market.

6. Group-level supervision continues to tighten, as entity-level supervision adopts tiered approach

Since the publication of the Measures for the Supervision of Insurance Group Companies in 2021, most of the earlier regulations issued by the former China Insurance Regulatory Commission have either been superseded or are no longer in effect. In practice, many insurance groups have expanded beyond their core insurance business into a wide range of financial sectors, including asset management, securities, banking, and trust services, with some further venturing into non-financial areas such as real estate and industrial investments. These trends have resulted in multi-layered organizational structures, complex governance challenges, and an elevated risk of cross-sector contagion, underscoring the need for a supervisory approach that moves beyond a single-perspective view.

NFRA strengthened the oversight framework for insurance groups in 2025 with the release of two complementary rules: the Measures for Consolidated Supervision of Insurance Groups and the Guidelines on Concentration Risk Supervision of Insurance Groups. The new rules refine the criteria for determining the scope of consolidation, applying a substance-over-form and risk-inclusive approach to capture entities that may otherwise fall outside a purely equity-based calculation. Under these rules, group members are now required to step up control over concentration risks arising from investments in the same entity, asset or business. Intra-group activities such as financing, guarantees, and economic benefit transfers will also be subjected to closer regulatory scrutiny.

At the same time, progress was made in developing the tiered classification system for institutional supervision. The Measures for the Supervisory Ratings of Insurance Companies apply to a broader range of entities, including insurance groups, property and casualty insurers, life insurers, reinsurance companies, and branches of foreign reinsurers. Building on the earlier rating framework for life insurers, the new measures expand the rating factors and introduce sub-grades under certain rating levels. The rating results will serve as an important basis for guiding regulatory actions, market access decisions, and on-site inspection priorities in day-to-day supervision.

7. Strengthening financial consumer protection with “teeth and thorns”; insurance products now subject to suitability management

The latest round of institutional restructuring expanded the NFRA's jurisdiction to include a strong focus on financial consumer protection. On the enforcement front, NFRA and the Ministry of Public Security released two batches of typical cases involving illicit finance. These cases highlighted contract fraud disguised as surrendering a long-term insurance policy shortly after purchase to gain commission, and illegal use of personal information to purchase insurance policies and surrender the same on behalf of policyholders afterwards. In March, the two authorities strengthened the administrative-criminal coordination mechanism by jointly issuing the Provisions on Strengthening the Transfer of Suspected Criminal Cases in the Banking and Insurance Sectors.

On the dispute resolution front, NFRA, together with the People's Bank of China and CSRC, issued the Opinions on Promoting the High-Quality Development of Financial Dispute Mediation Work. The document outlines measures to establish mediation organizations, build a qualified mediator workforce, enhance collaboration between financial regulators and people's courts, and create fast-track mechanisms for resolving low-value disputes.

In July, the NFRA issued the Measures for the Administration of Product Suitability Management of Financial Institutions, which for the first time brought insurance products within the scope of suitability regulation. Industry associations are actively developing complementary self-regulatory rules to support implementation. “Suitability” refers to the practice of selling or providing suitable products and services to suitable investors. CSRC first introduced such requirements in 2016, mandating that market participants align risk profiles on both the product and investor sides.

The new measures require insurers to integrate suitability management into their sales processes through product grading, channel classification, and customer categorization. However, unlike most financial products, the core function of insurance is to provide personal and property protection. Recognizing this distinction, the measures preserve a degree of exemption for insurance institutions when a consumer refuses to accept the outcome of a suitability assessment and insists on entering into an insurance contract. Nonetheless, how this exemption will operate in practice remains to be tested through judicial interpretation.

In September, NFRA issued the Measures for the Supervisory Assessment of Financial Institutions' Consumer Protection, further expanding the existing assessment criteria. Under the revamped mechanism, local NFRA offices are granted a degree of autonomy to tailor assessment indicators to local conditions, enabling them to make the most of dynamic supervision.

8. Faster delegation to local regulators, with continuous improvement of administrative procedures

In mid-2025, the number of institutions directly supervised by the NFRA headquarters was further reduced, with supervisory authority over a broader range of institutions delegated to local regulators. In October, NFRA issued the Notice on Authorizing the Adjustment of Supervisory Level for Certain Administrative Licensing and Reporting Matters, delegating authority over specified licensing and reporting matters to its local bureaus. This framework fully demonstrated the advantages of the "four-tier vertical regulatory system". NFRA headquarters redirected more resources toward supervision of groups and large institutions, as well as systemic risk prevention. Local bureaus assumed primary responsibility for day-to-day supervision and risk monitoring of small and medium-sized insurance institutions within their jurisdictions. Local sub-bureaus, in turn, focused on the oversight of branch-level institutions.

Administrative inspections have long been a key area of regulatory resource allocation. In April, the General Office of NFRA issued the Notice on Regulating Administrative Inspection Work within the NFRA System, which introduced stricter controls on the frequency of inspections. Under the new rules, on-site inspections of the same institution should in principle be limited to twice per year. The notice also calls for a differentiated approach to supervision, applying the principle of "high risk, high intensity; low risk, low intensity”. By incorporating factors such as regulatory ratings, this approach aims to further optimize the allocation of regulatory resources.

The Administrative Penalty Measures of the NFRA, issued in April, were designed to align with the updated Administrative Penalty Law. Drawing on past enforcement experience, the measures further improve procedural rules on suspension of penalties, case closure, non-imposition of penalties and penalty enforcement.

Subsequently, the NFRA issued the Provisions on the Implementation Procedures for Administrative Licensing, which prescribes a framework for combined review in cases where a single transaction triggers multiple administrative approvals, or where a single act is subject to different approval requirements. A typical example in practice is an insurance company making a major equity investment in another insurance institution. Looking ahead, the relevant processes are expected to be further clarified and streamlined.

Regulatory Outlook for 2026

1. Asset-liability management coming under pressure; insurers to actively explore diversified allocation

In a low-interest-rate environment, timely cost reduction on the liability side is a necessary measure, while sustained efficiency improvement on the asset side is key to addressing the underlying challenges.

The long-anticipated pilot program allowing insurance funds to invest in gold was launched in 2025, against the backdrop of continued gold price increases. Although insurers' initial responses have been relatively cautious, the potential for further expansion of the pilot in the future remains promising.

Insurers continue to show strong demand for global asset allocation. However, limited QDII quotas, coupled with geopolitical tensions and multiple regulatory constraints, have kept domestic insurers' overseas investment ratios well below the regulatory ceiling. That said, regulators have acknowledged the market's positive attitude toward offshore allocation.

In mid-2025, the Southbound Bond Connect scheme was opened to insurance funds, creating a new channel for insurance capital to access offshore markets. We look forward to the introduction of more QDII-supportive policies to enable insurers to make more effective use of their foreign‑currency income overseas.

Under the new accounting standards, interest rate fluctuations have a more pronounced impact on both assets and liabilities, raising insurers' requirements for asset-liability duration matching. The Administrative Measures for Asset-Liability Management of Insurance Companies (Draft for Comment), published at the end of 2025, incorporated the hedging effect of financial derivatives into duration calculations for the first time, indirectly reflecting regulatory recognition of the functional role of derivatives. We expect that a growing number of insurers will manage durations and proactively hedge interest rate risk using instruments such as options and swaps.

2. Strengthened data governance as the insurance industry explores data classification and segmentation

Since the enactment of the Cybersecurity Law and the Data Security Law, the insurance industry has long lacked specific guidance on data classification and segmentation. At the end of 2024, the NFRA issued the Measures for Data Security Management of Banking and Insurance Institutions to align with existing legislative standards. In 2025, BIAMAC released the Guidelines on Data Classification and Segmentation for the Insurance Asset Management Industry, focusing on data classification and segmentation specifically within the context of insurance asset management operations. A broader range of insurance institutions may also adopt the methodology set out in the guidelines to build and improve their own data security management processes.

In the area of cross‑border data flows, the Shanghai Cyberspace Administration, together with other government authorities and the management committees of the Shanghai Free Trade Zone and the Lingang New Area, jointly developed the country's first negative list for outbound reinsurance data transfers, along with corresponding operational guidelines. These instruments are designed to address key challenges in cross‑border reinsurance operations faced by institutions within their respective jurisdictions. We hope that the outcomes of this regulatory innovation will transcend geographic boundaries, play a broader role, and contribute to the development and refinement of critical data catalogs for the insurance industry.

3. Insurance industry to adopt a multi-pronged approach to advancing the "Five Key Areas"

In 2025, focusing on the core priorities of the "Five Key Areas" outlined at the Central Financial Work Conference, the NFRA issued a series of implementation plans to promote high-quality development. These plans collectively highlight the key policy focus areas for the insurance industry in the next phase.

In technology finance, the plans encourage insurers to improve technology insurance services, increase investments in technology innovation bonds and asset-backed securitization products, and support the development of the National Insurance Innovation Comprehensive Pilot Zone in Ningbo, the Donghu Technology Insurance Innovation Demonstration Zone, and the Technology Insurance Innovation Leading Zone in the Lingang New Area of the China (Shanghai) Pilot Free Trade Zone.

In green finance, the plans call on insurers to enhance catastrophe insurance and environmental liability insurance, develop carbon sink price insurance and carbon emission trading insurance, and invest in green bonds and other sustainable financial products.

In inclusive finance, the plans encourage insurers to offer insurance products for agriculture, rural areas and farmers, small and micro enterprises, and specific groups such as low-income or underserved populations. They also promote the provision of high-quality, affordable insurance products, with pricing supported by actuarial back-testing to ensure fairness and sustainability.

In pension finance, the plans support qualified insurers in participating in enterprise annuity and occupational annuity fund management services. They also encourage the development of insurance products tailored to the needs of elderly individuals and elderly care institutions. In addition, insurers are encouraged to invest in elderly care facilities, rehabilitation hospitals, specialty hospitals, and silver economy industrial parks.

In digital finance, the plans support insurers in exploring and developing insurance products related to data assets and cybersecurity. They also encourage the use of digital technologies to provide insurance compensation services for the first sets of major technical equipment and first batches of new materials, helping to reduce risks and encourage innovation.

4. Further health insurance reform may pave the way for new growth in health management services

The health insurance market has grown rapidly, thanks to the rising popularity of urban commercial medical insurance and government efforts to control costs under the basic medical insurance system. Despite this growth, most products look very similar, are relatively expensive, and often lack comprehensive coverage.

In September, the NFRA issued a new policy document aimed at promoting the high-quality development of health insurance. It sets out the general direction for the industry, encouraging long-term medical insurance products to adopt risk-based pricing and allow premium adjustments. It also supports the exploration of personal account models and calls for faster development of rules for variable-return health insurance products.

On the product supply side, the policy encourages insurers to develop commercial medical insurance products that benefit people with pre-existing conditions and rare diseases. It supports the full rollout of mechanisms that allow conversion between life insurance coverage and long-term care payment obligations, and encourages insurers to cover new medical technologies, drugs, and medical devices. The document also promotes flexible payment arrangements, such as negotiated pricing and payment based on treatment outcomes.

Insurance companies are also actively adjusting their strategies, shifting from traditional post‑claim settlement toward proactive risk management and mitigation. Current regulations permit insurers to combine health insurance products with health management services, provided that the cost allocated to such services does not exceed 20% of the net premium.

In 2025, PICC and China Life successively established dedicated health management companies. With the high‑profile entry of these "national team" players, it remains to be seen whether the 20% cost cap may be moderately relaxed and what new business models will emerge in the market.

5. Pioneering the "sidecar" model with more risk transfer products on the horizon

In September, the Property and Casualty Insurance Department of the NFRA issued the Notice on Matters Related to Domestic Insurance Companies Issuing Insurance-Linked Securities in the Hong Kong Market, supporting domestic insurers willing to issue "sidecar" insurance linked securities in the Hong Kong market. Under this framework, insurers may cede catastrophe risks, such as those arising from earthquakes, typhoons, floods, and sudden public health emergencies, on a proportional basis to specially established special purpose insurance vehicles. These special purpose vehicles would then issue equity or debt-based insurance-linked securities to raise the funds necessary to fully meet the relevant payout obligations, thereby achieving effective risk diversification.

Before this, regulators had already opened a channel for catastrophe bond issuance in the Hong Kong market in 2021. The introduction of the "sidecar" product represents a further step building on that foundation. Hong Kong is undoubtedly the best first port of call for mainland insurers seeking access to overseas capital markets. We await the emergence of more regulatory "sandboxes" in the future to further expand the range of innovative risk transfer products.