The insurance market since the beginning of 2026 is intensively releasing two key signals.

Written by: Zheng Jiayi

Source: Wall Street Journal

The insurance market since the beginning of 2026 is intensively releasing two key signals.

First, the asset side's pricing indicator has initially stabilized:

On April 24, the China Insurance Association announced that the benchmark interest rate for ordinary life insurance products is 1.93%. This figure has risen by 4 basis points compared to January, changing the previous downward trend;

Currently, this research value is only 7 basis points away from the traditional insurance cap of 2.0%. Because it has not reached the regulatory adjustment threshold of 25 basis points, the probability of further lowering the cap on the benchmark interest rate for currently sold products in the short term has significantly decreased, thereby restoring industry expectations.

Second, the scale of premiums on the liability side has continued its growth momentum since 2025:

In the first quarter of this year, the insurance industry achieved total premium income of 2.31 trillion yuan, of which life insurance companies collected 1.78 trillion yuan. Annuities, endowment insurance, and increasing amount whole life insurance, which emphasize savings functions, are the main drivers of premium growth. In some leading insurance companies, the proportion of such business remains high.

The stable and increasing data reflects a structural change in residents’ wealth. Funds are flowing out of traditional savings channels and into the insurance market.

Wealth Transfer: Declining Interest Rates Reshape Fund Distribution

Every collective shift of wealth is driven by macroeconomic cycles.

Since 2025, residents' defensive saving mindset has become solidified, and the phenomenon of regular deposits has become significant. The cost pressure on the liability side of commercial banks has consequently increased.

Data from the National Financial Regulatory Administration shows that by the end of the fourth quarter of 2025, the net interest margin of commercial banks fell to 1.42%, with an annual average of about 1.5%. As benchmark interest rates have been significantly lowered, the retention space for higher-cost funds has been compressed, leading some funds to seek alternatives in the non-bank system.

The two traditional channels for fund flow—bank wealth management and public funds—are facing challenges in the current market environment.

In the era of full net value, the performance of wealth management products is directly linked to the fluctuations of underlying assets.

During the volatility from 2025 to early 2026, the scale of fixed-income wealth management products, based on bonds and non-standard assets, has seen increased fluctuations. Some products have experienced net value declines, altering some investors' perceptions of their stability.

Data from the bank's wealth management registration and custody center indicates that by the end of the first quarter of 2026, the total size of wealth management products in the market was 31.91 trillion yuan, down 1.38 trillion yuan from the end of 2025.

Yield has also come under pressure, with the average annualized yield of wealth management products in March being just 1.01%, lower than 2.11% in February and 3.71% in January. The growth of the wealth management market scale faces resistance.

At the same time, the performance of public funds' equity products is closely related to the conditions of the capital market.

Amid the continued volatility of the stock market and style rotations in recent years, fund performance has diverged. The gap between fund returns and investors' actual returns is exhausting investor confidence. The fundraising for new funds has cooled, and existing funds are showing cycles of redeeming old funds and buying new.

Although new fund issuance exceeded 300 billion yuan in the first quarter, the overall size of public funds declined slightly from 37.64 trillion yuan at the end of 2025 to 37.52 trillion yuan by the end of the first quarter of 2026.

Structurally, the size of equity funds decreased by nearly 16% compared to the previous quarter, and the overall ETF market size shrank by over 1 trillion yuan. The head effect in the new issuance market is evident, with some products facing fundraising difficulties, reflecting changes in investor expectations.

In this context, the risk preference of some retail investors has tended to be conservative. When the core demand shifts from appreciation to capital preservation and stability, savings-type insurance products with long-term locked interest rates, clearly specified yields in contracts, and accompanying protection functions start to play a stabilizing role.

These products have absorbed some deposits flowing out of the banking system and reflect a certain capital accumulation effect. The spread of risk aversion has made certainty the scarcest asset in the current market.

Asset-Liability Game: Hidden Concerns Following Influx of Long-term Funds

Behind the prosperity of the liability side often lurks the hidden concerns of the asset cycle. The influx of long-term funds poses a challenge for insurers in terms of asset-liability matching.

In the context of tight asset supply, high-quality corporate bonds and higher-yield non-standard assets are relatively scarce. Despite occasional marginal improvements in long-term interest rates, as of April 2026, the yield of 30-year government bonds remained in the range of 2.21%-2.25%.

According to institutional estimates, the composite liability cost of existing policies in the industry remains high. The game between investment returns and liability costs poses a latent risk of margin losses that insurers need to confront.

Currently, the trend of residents' funds shifting to the insurance system is beginning to emerge, but this is merely one aspect of industry transformation.

In an environment of normalized dynamic adjustment mechanisms for benchmark interest rates and pressured asset-side returns, the insurance industry is gradually changing its previous growth model, which relied on unilateral interest rate driving.

The industry is entering a new phase that emphasizes refined asset-liability management, product structure optimization, and enhanced investment capability.

This shift in funds triggered by deposit transfers not only tests the insurance industry's absorption capacity but also presents the entire financial system with a long-term issue of how to rebalance risk, return, and liquidity in a low-interest-rate environment.

As the tide of high growth recedes, the capability of refined operations will be the trump card for financial institutions to navigate through the cycle.