In a low-interest-rate environment, the risk of spread losses for traditional high-guarantee products is rising. Globally, savings-type life insurance products are transitioning from high-guarantee, rigid return promises towards low-guarantee, floating returns, and risk-sharing. Given that Chinese residents' overall risk appetite tends to be conservative, it is anticipated that participating insurance will become the main direction for savings insurance transformation in this low-rate era. This shift is expected to drive improvements in industry liability-side costs and product value. An "Overweight" rating on the sector is maintained.

GTHT's key views are as follows:

International Experience

The global shift of savings-type life insurance towards floating-return products shows variations across different countries and regions. The United States primarily features universal, indexed, and account-type products, with the proportion of annuity premiums to total premiums increasing from 10.1% in 1970 to 52.4% in 2024. Germany has reduced rigid promises through low-guarantee, participating, and hybrid products; in 2024, guaranteed hybrid annuities and fund-linked annuities together accounted for approximately 39% of new business. In Japan, variable insurance constituted about 19% of new business in 2024. In South Korea, variable and interest-sensitive products combined approached 80% of new business. Hong Kong, China, centers on participating savings insurance, with its share of new business rising from 32.6% in 2000 to 85.5% in 2025.

External Drivers

The direction of product transformation is jointly determined by the low-interest-rate environment, regulatory guidance, and capital market suitability. Low interest rates compress the supply space for high-guarantee products. Regulators guide the industry away from competition based on assumed interest rates towards risk-sharing by lowering assumed interest rates, improving disclosure for investment-type products, and strengthening sales suitability and solvency capital requirements. Resident risk appetite determines the acceptance of floating-return products. For insurers, transforming product functionality, return realization, account systems, and channel integration become core levers.

(1) Enriching Product Functionality: Exemplified by Hong Kong's participating insurance, insurers upgrade savings policies into wealth management and inheritance tools through features like multi-currency conversion, bonus locking and withdrawal, policy splitting, and changing insured persons.

(2) Stabilizing Return Realization: The competitive focus for participating insurance shifts from illustrated yields to the management of the participating fund and the bonus realization rate. Leading insurers like AIA achieve more stable dividends by leveraging long-term investment capabilities.

(3) Building Diversified Account Systems: Insurers such as Prudential in the U.S. achieve "protection + account allocation + risk layering" through combinations of fixed accounts, indexed accounts, and separate accounts.

(4) Strengthening Channel Integration: Bancassurance channels cater to savings clients, while agency forces focus on explaining protection and inheritance features.

Overall, insurer competition will evolve from yield competition to comprehensive competition based on product, investment, account, and channel capabilities.

Domestic Implications

China's savings-type life insurance products have evolved from traditional types to universal life, increasing whole life, and now a resurgence of participating insurance. The future is expected to continue this trend towards participating insurance, persistently optimizing the product structure. Participating insurance, with its combination of "guaranteed benefits + non-guaranteed bonuses," balances client stability and investment return sharing, making it more suitable for Chinese residents' conservative savings needs. Simultaneously, it helps reduce rigid liability costs, optimize asset-liability duration gaps, and, under new accounting standards, mitigates financial statement volatility over the long term through the VFA model.

Looking ahead, the transition to participating insurance will shift industry competition from assumed interest rates and expense competition to competition based on investment capability, participating fund management, capital strength, brand credibility, and channel explanatory power. Leading insurers, leveraging advantages in long-term investment, asset-liability management, bonus realization rates, and bancassurance/agency channel synergy, are poised to see a continued optimization of the industry landscape.

Risk warnings include: Declining long-term interest rates; volatility in equity markets; underperformance in participating insurance sales and bonus realization; changes in regulatory policy; and a decline in residents' risk appetite.