Average annual investment return rate declines to 2.23% for Chinese insurers

Written by Adam Cadle

25/03/2024

The average annual rate of return on investments for all Chinese insurers, excluding unrealised gains, declined by 1.53 percentage points from 2022, to 2.23% in 2023, Fitch Ratings has said.

Chinese insurers’ investment returns are under pressure from declining interest rates and high stock market volatility in onshore markets. However, Fitch said it believes the lower interest rates have not led to a greater allocation to riskier assets at its rated insurers, as the tightened capital framework since 2022 has encouraged insurers to lower their risk appetites.

Insurers’ property investments have been a focal point in recent press reports, as the distress among Chinese developers continues to spread.

“We do not expect our rated issuers to experience significant losses in their property-related investments, as we believe their property exposures are diversified and limited,” Fitch stated.

“Some life insurers have invested portions of their assets in the property sector in the form of equity or fixed-income securities, including some non-standard assets, such as trust plans and other asset-management products. We estimate that our rated Chinese life insurers’ direct exposures to the commercial property sector are around a mid-single-digit percentage or lower of total invested assets. Non-life insurers are generally less exposed to commercial property-related investments, reflecting the shorter-tailed nature of their insurance liabilities and smaller operational scales.”

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