# Small and Medium-sized Insurers Reducing Positions Due to Solvency Pressure? Multiple Insurance Institutional Sources: Individual Normal Adjustments Have Minor Impact, Do Not Change Increasing Position Trend

Recently, the A-share market has experienced fluctuations, sparking widespread discussion. As the profit-taking effect cools down, capital has become more cautious, and there are reports that small and medium-sized insurance companies are reducing their holdings due to new solvency regulations, which may be a major reason for market volatility.

In response, several market insiders told Caixin that the information is inaccurate, and that insurance capital is not the main cause of market fluctuations. “The new solvency regulation phase three is still in the planning stage, and most institutions expect the implementation date to be uncertain,” said an insurance industry insider.

Several insurance professionals told Caixin that the insurance industry is highly concentrated, with large leading companies holding most of the investment assets. The reduction in holdings by some small and medium-sized insurers has a very limited impact on the overall market. “More importantly, the second phase of the solvency regulation was officially launched in 2022. Although the transition period has been extended, leading insurance companies have already implemented it over the past three years, and most small and medium-sized insurers have also adjusted and are gradually coping with the pressure. The relevant assessments are dynamic and not as hotly discussed as the market claims about the end of March.”

Some industry experts also told Caixin, “Overall, this week’s correction in A-shares was not caused by a single factor but resulted from a combination of internal and external pressures and synchronized market sentiment. Future investment opportunities will focus on structural themes. Investors do not need to be overly pessimistic; they should patiently wait for the risk release to end before making strategic moves.”

Full implementation of the second phase of solvency regulation, three years of pressure management, and the ongoing development of phase three

“Although the transition period extension for the second phase of solvency regulation has ended, the third phase based on new accounting standards is still under development and has not been implemented, so it will not influence insurance capital rebalancing actions,” said the general manager of the asset-liability management department of a state-owned medium-sized life insurance company.

Caixin reviewed policies and found that in December 2021, the original China Banking and Insurance Regulatory Commission issued the “Insurance Company Solvency Regulatory Rules (II)” (hereinafter “Rules II”) and the “Notice on the Implementation of Insurance Company Solvency Regulatory Rules (II).” For insurers experiencing a decline in comprehensive solvency ratio due to the transition between old and new rules, transition policies are determined on a case-by-case basis, and from 2025, the full implementation of Rules II will begin.

On December 20, 2024, considering that the impact of switching to Rules II has not been fully absorbed, and to maintain stable industry operations, regulators decided to extend the transition period for Rules II until the end of 2025 after careful review.

“Since 2026, as life insurers gradually adopt new accounting standards, industry net asset fluctuations may become more pronounced. However, the third phase of the second-generation solvency regulation is still under research and formulation, and we expect it to be implemented starting in 2027,” said a chief analyst at a securities firm.

“The draft for the third phase of the second-generation solvency regulation has not yet been issued,” said the chief investment officer of a joint-venture life insurance company. Overall, the regulatory framework for insurance solvency is expected to relax further with macroeconomic and market changes.

“If the third phase of the second-generation regulation is implemented now, insurance institutions might find it easier. The pressure mainly comes from the fact that the third phase has not yet been rolled out,” the person added.

“From the overall policy rhythm, it’s clear that regulatory policies are designed with macroeconomic conditions in mind, and insurance institutions’ perceptions are taken into account,” said an investment professional at a mid-sized insurance company. Even if policies are implemented, there will be sufficient adaptation periods, and both business and various impacts will be gradually absorbed.

Impact of some small and medium-sized insurers reducing holdings is limited

“There are definitely some insurers reducing holdings to maintain solvency, but blaming all market declines on this is exaggerated,” said the general manager of a bank-affiliated insurance asset management company.

“Recently, some industry peers have indeed reduced holdings,” said an insurance asset management professional, but emphasized that both selling and buying activities are normal market investment behaviors. Small adjustments have a very limited impact on the market.

“Reducing holdings by small and medium-sized insurers due to solvency is not the main reason for market declines,” said the chief risk officer of a leading insurance asset management firm. Large insurers already account for over 60% of industry assets, and small and medium insurers have a relatively small share. Even if they reduce holdings, the impact on the market is limited and unlikely to significantly affect the stock market.

Data from mid-2025 shows that the total insurance funds invested by seven listed insurers—China Life, Ping An, China Pacific Insurance, PICC, New China Life, China Taiping, and Sunshine Insurance—amounted to 21.85 trillion yuan, accounting for 60.3% of the industry total.

In terms of equity asset allocation, larger insurers are more active. The stock investment scale of these seven companies reached 2.05 trillion yuan, an increase of 431.3 billion yuan from the beginning of 2025, accounting for 67.39% of the industry’s net increase.

The insurance industry’s incremental capital scale is large, with long durations, and the trend of increasing stock holdings will not change

“In recent years, driven by multiple departments, insurance funds—typical long-term capital—have significantly entered the market,” said an equity investment professional at a Shanghai-based insurance asset management firm. Despite the slow equity market recovery last year and low bond yields, the trend of increasing stock holdings has continued.

According to the China Banking and Insurance Regulatory Commission, by the end of 2025, the total assets under management by insurance companies reached 38.48 trillion yuan, a 15.7% increase from the beginning of the year, with a net increase of over 5 trillion yuan.

Among them, the assets of large life insurers with long-term liabilities totaled 34.66 trillion yuan, up 15.73% from the start of 2025. The stock investment balance of life insurers was 3.51 trillion yuan, an increase of over 1.2 trillion yuan during the year; stocks accounted for 10.12%, up 2.55 percentage points year-on-year, reaching a new high in allocation.

Since 2022, the asset allocation ratios of life insurers across various asset classes have been as follows:

“Generally, the first quarter’s ‘opening season’ premium income accounts for about 40% of the annual premium, and this part of the funds usually enters the allocation peak after the two sessions in March and after the market clears of negative sentiment. Additionally, since 2026, under the background of deposit transfers, new insurance premium growth has been impressive, with a substantial overall increase in new premiums, providing ample new capital for investment,” said the professional.