China Tightens Long-Term Performance Metrics to Channel Insurance Funds into Markets
By Wu Yujian and Denise Jia
China’s Ministry of Finance has unveiled new performance assessment rules for state-owned insurance companies, aiming to channel more long-term insurance capital into equity markets and reinforce the sector’s role as an economic stabilizer.
On Friday, the ministry issued a notice to major insurers — including the People’s Insurance Company of China, China Life Insurance Co. Ltd., China Taiping Insurance Holdings Co. Ltd. and China Reinsurance Group Corp.— as well as local financial regulators. The document increases the emphasis on long-term indicators in key financial performance metrics, starting with the 2025 evaluation cycle.
Specifically, the new rules place greater weight on long-term return on equity (ROE) and incorporate long-term targets into the metric for preserving and growing state-owned capital. The ministry said the move is intended to promote the stable, prudent operation of state-owned insurers and encourage more long-term capital inflows into the market.
The shift builds on earlier reforms. In October 2023, the Ministry of Finance adjusted ROE assessments from a one-year focus to a blended model that combined annual and three-year averages, each weighted at 50%. The latest policy adds a five-year component to this framework.
The drive to channel long-term insurance funds into capital markets accelerated in January 2025, when six government agencies jointly issued a plan to boost institutional investment. At the time, Vice Finance Minister Liao Min said the government would revise insurer performance metrics to better support long-cycle investing.
Under the updated system, the ROE metric will now calculated using a weighted average of one-year (30%), three-year (50), and five-year (20) performance. Long-term assessments from 50% to 70%.
The “state-owned capital preservation and appreciation” metric will follow the same structure: one-year (30%), three-year (50%), and five-year (20%) indicators. Long-term components now account for 70% of this measure as well.
The notice also outlines broader expectations for state-owned insurers, including improved asset-liability management, tighter alignment between asset and liability durations, cash flow planning and more balanced cost-benefit strategies. Insurers are encouraged to enhance asset allocation strategies, optimize equity exposure and strike a prudent balance between return and risk.
Additionally, state-owned insurers are required to prioritize long-term, value-oriented investment strategies and incorporate medium-to-long-term evaluation mechanisms into internal governance. Strengthening investment management capabilities and continuously strengthening internal controls remains a critical priority.
Contact reporter Denise Jia (huijuanjia@caixin.com)
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