CITIC SEC has released a research report indicating that the newly issued regulations serve as the institutional cornerstone for the insurance industry's transition from scale expansion to high-quality development. In the short term, the divergence between capital market pressures and strong fundamental performance observed in the first half of the year has created a margin of safety supported by current PB valuations and dividend yields. Over the medium to long term, the industry's opportunity lies in a cyclical reversal that could deliver a dual boost to both valuations and fundamentals. The report recommends focusing on leading insurance companies.

The report outlines key developments, noting that on August 20, 2026, the National Financial Regulatory Administration officially released the Measures for the Administration of Insurance Company Assets and Liabilities, effective January 1, 2027. The new rules establish three primary management objectives: term structure matching to mitigate interest rate and reinvestment risks, cost-income matching to prevent spread losses, and liquidity matching to address liquidity risks. Four fundamental principles are also introduced: comprehensive coverage, rational matching, prudence, and coordinated planning, requiring all assets and liabilities in ordinary accounts to be managed as a cohesive whole while accommodating differentiated allocation based on liability characteristics.

The new rules are accompanied by regulatory and monitoring indicators for both property and casualty insurance and life insurance. For property and casualty insurers, three regulatory indicators are set: coverage of accumulated funds (≥100%), income coverage ratio (sum of insurance service income and comprehensive investment income over the past three years divided by comprehensive costs over the same period, ≥100%), and liquidity coverage ratio (≥100%). Four monitoring indicators include spread one, spread two, and spread one under two stress scenarios. For life insurers, four regulatory indicators are established: interest rate risk hedge ratio (50%-150%, with inflow sensitivity of no less than 5% when below 50%), comprehensive investment income coverage ratio (sum of comprehensive investment income over the past five years divided by total liability funding costs over the same period, ≥100%), net investment income coverage ratio (net investment income over the past three years divided by guaranteed liability costs over the past three years, ≥100%), and liquidity coverage ratio (≥100%). Eight monitoring indicators include effective duration gap, basis point value change rate, spread three, spread four, and income-cost differentials and liquidity matching ratios under various stress scenarios.

Compared to the earlier draft for comments, the final version downgrades the effective duration gap for life insurers from a regulatory indicator to a monitoring indicator, removing the hard ±5-year threshold, while upgrading the interest rate risk hedge ratio to a regulatory indicator. A three-year transition period is allowed for insurers that temporarily fail to meet regulatory standards.

The new rules are expected to shift operational logic toward full-chain coordination, with leading insurers likely to expand their relative advantages. The traditional growth model of high-cost liabilities paired with high-risk assets will be completely phased out. Large insurers, with diversified investment channels and professional teams, are better positioned to achieve cost-income matching, design liability products based on asset-side capabilities, and build integrated information systems to support complex indicator monitoring. Smaller insurers still need to address shortcomings in departmental independence, data governance, modeling tools, and third-party verification, facing greater pressure from compliance costs and business restructuring. Industry-wide, the hard requirement for cost-income matching will curb disorderly expansion of high-liability-cost products, while term structure matching will promote corresponding allocation of long-term liabilities and assets. The dual-track supervision of liquidity coverage will enhance the industry's risk resilience. Compliance costs and capability barriers will accelerate industry consolidation, further strengthening the trend of resource concentration toward top players.

The new rules are set to reshape the valuation framework for insurance stocks from three dimensions. First, the mitigation of spread loss risk could drive valuation recovery. A core reason for the long-standing pressure on insurance stock valuations has been market concerns over spread loss risk. By incorporating cost-income matching and interest rate risk hedge ratios into mandatory regulatory indicators, insurers must actively control liability costs and optimize asset duration matching. Listed large insurers have stronger capacity to cover liability costs with investment returns, and the dissipation of spread loss concerns could lift embedded value multiples.

Second, the independence requirement for asset-liability management accelerates industry differentiation, widening the premium for leaders. Listed insurers possess significantly stronger capabilities in organizational structure, talent reserves, and information systems compared to smaller peers, enabling faster establishment of independent departments and cross-departmental coordination mechanisms. These compliance capability differences will directly impact business expansion space and regulatory ratings, subsequently translating into divergence in market share and profitability.

Third, a shift in allocation logic under asset-liability linkage emerges. Listed insurers, leveraging stronger brand credibility and capital scale, hold clear advantages in alternative investments, long-duration government bonds, and infrastructure debt plans, allowing for better term structure matching. Additionally, this linkage logic will curb reliance on short-term high-cash-value products, driving a transition toward protection-oriented and long-term savings products, which should improve new business value margins.

Key risk factors include a medium-to-long-term downward trend in interest rates, significant equity market volatility leading to investment losses, and a period of sluggish or below-expectation premium growth.