Have clients been asking you lately, "Where exactly does my premium go?" The answer to that question is undergoing its most significant transformation in five years. Trust plans, which once held the top spot in insurers' alternative asset allocation, have seen their scale plummet from a historical peak of 1.65 trillion yuan at the end of 2020 to roughly 800 billion yuan by the end of 2025, representing a staggering five-year halving. Their share of total insurance investment assets has correspondingly fallen from about 8% to approximately 2.3%.

The money hasn't vanished—it's simply migrated toward semiconductor chips, AI computing power, asset-backed securities, and S-funds. In other words, your clients' policy funds are relocating from "steel and concrete" to "chips and compute."

For professionals in the industry, this is far more than a routine investment headline. With participating life insurance policies becoming the market mainstream, an insurer's investment strategy and asset allocation capabilities now directly determine policyholders' variable returns. Understanding this "asset migration" of 40 trillion yuan of insurance capital gives you a new dimension to explain policy value to clients.

The Five-Year Contraction: From 1.65 Trillion to Less Than Half the Peak

Since regulators permitted insurance funds to invest in trust plans in 2012, such allocations grew from under 30 billion yuan, surpassed 1 trillion yuan in 2017, and hit an all-time high of 1.65 trillion yuan at the end of 2020. The turning point came in 2021. According to the China Insurance Asset Management Industry Development Report, insurance capital allocated to trust plans recorded its first-ever annual decline that year, falling to 1.41 trillion yuan by year-end, a drop of more than 14%.

The downward trajectory has continued unabated ever since: approximately 1.20 trillion yuan at the end of 2023, around 1.01 trillion yuan at the end of 2024, and roughly 800 billion yuan by the end of 2025—the first time the figure has fallen below the trillion-yuan threshold since 2017. Data from the China Insurance Asset Management Industry Development Report (2025), released in November 2025, showed that among 201 insurers surveyed, total investment assets reached 30.55 trillion yuan, with trust plans accounting for only 3.4%. By the end of 2025, that proportion had fallen further to about 2.3%. Among all asset classes within insurance capital allocation, trust plans have registered the most dramatic decline.

Three Converging Forces: Regulation, Credit Risk, and Low Rates

The sustained contraction of insurance capital's trust allocation results from the convergence of three powerful forces: a reshaping regulatory framework, credit risk exposure, and fundamental shifts in the macroeconomic interest-rate environment.

First, regulators have systematically compressed financing-type trust business, effectively cutting off the supply side. Starting in 2020, regulatory guidance to reduce financing-type trust products narrowed the supply pipeline, leaving fewer high-quality projects that could meet insurers' risk-control standards. As one fixed-income department head at an insurance asset management company noted, "The scale of cooperation has clearly decreased. While new deals still come through, net additions are negative." At the same time, trust companies have pivoted toward asset-service trusts under the new "three-category" business classification rules—and service-type trusts generally do not involve insurance capital investment.

Second, defaults on real estate trust products have shattered the long-held "non-standard credit faith." The belief that non-standard trusts offered "stable returns with low risk" has been severely undermined, prompting insurers to tighten their investment strategies significantly. One insurance asset allocation professional observed that previously, insurers primarily invested in collective trust plans tied to real estate loans and working-capital loans for industrial and commercial enterprises—"now the former category has essentially vanished, and the latter has shrunk dramatically." Some insurance companies even maintain unfilled allocation quotas for trust plans, not for lack of willingness, but for lack of qualifying targets.

Third, the low-interest-rate environment has intensified the "asset shortage." Yields on non-standard assets have continued to slide; for example, returns on debt investment plans with strong credit quality have now entered the "2% range." With traditional financing demand contracting and the real estate and infrastructure sectors in cyclical adjustment, the asset shortage has become even more pronounced. Notably, it's not just trust plans—insurance capital's allocation to debt investment plans is also shrinking in tandem.

Where the Money Is Going: Four New Investment Frontiers

The contraction of trust plans does not mean insurers have abandoned alternative investments. Instead, they are shifting from traditional debt-based non-standard assets toward equities, asset securitization, and private equity.

Direction one: Equity allocation is accelerating under a "barbell strategy." Regulatory data shows that insurance funds under management surpassed 40 trillion yuan for the first time in the second quarter of 2026, reaching 40.82 trillion yuan. Combined allocations to stocks and funds rose to 16.23% of total assets—both scale and proportion hitting record highs—with nearly 490 billion yuan added in the single second quarter. The barbell approach has become mainstream: one end uses high-dividend, low-volatility stocks as a foundation to replace non-standard returns, while the other end pursues long-term growth through hard-tech exposure. Before ChangXin Memory Technologies' IPO, six insurers invested 2.385 billion yuan against market trends, generating combined paper gains exceeding 114.4 billion yuan on its first trading day. For Unitree Robotics' listing, more than 30 insurers gained indirect stakes through PE funds. At an industry closed-door meeting, Li Sheng, Deputy General Manager of Huatai Asset Management and General Manager of Huatai Baoli, made clear that the company's equity investment strategy is focused on two areas: computing power and electric power infrastructure.

Direction two: ABS and REITs are opening new pathways. The five licensed insurance asset management companies—China Life Asset Management, Taikang Asset Management, CPIC Asset Management, PICC Asset Management, and Ping An Asset Management—have collectively submitted 20 ABS projects to the Shanghai and Shenzhen stock exchanges since receiving pilot approval, with total scale reaching 32.053 billion yuan. Within the securitization chain, trusts serving as SPVs have forged a clear division of labor with insurance asset managers, while also creating new entry points for the trust industry's own transformation.

Direction three: S-funds are surging. According to ZERONE data, new S-fund registrations in the first half of 2026 reached 7.866 billion yuan, with insurers contributing 41% of the capital—up sharply from just 3% in both 2024 and 2025. China Life has gone a step further, partnering with Fujian Province to establish a 4.015 billion yuan blind-pool S-fund, entering the market directly as fund manager. In terms of investment focus, S-funds are concentrating heavily on hard technology, with biopharmaceuticals and semiconductors together accounting for 48.6% of the top ten industry sectors targeted.

Direction four: LP contributions in the primary market remain elevated. According to CITIC Securities research, insurance capital LP commitments reached 148.08 billion yuan in 2025, a year-on-year increase of 14.2%. Although the first half of 2026 saw some pullback, industry consensus holds that insurers' long-term positioning as "patient capital" remains unchanged.

What This Means for Advisors: Your Clients' Policy Funds Are Moving

The journey from 1.65 trillion yuan to 800 billion yuan is, on the surface, the rise and fall of a single investment vehicle—but underneath, it represents a fundamental restructuring of the entire asset allocation paradigm for insurance capital. For bancassurance relationship managers and insurance agents alike, a new dimension of client conversation is opening up.

The next time a client asks where their policy funds are invested, you can respond with confidence: policy funds are no longer predominantly flowing into traditional non-standard real estate and infrastructure projects. Instead, they are being redirected toward hard-tech equity investments in areas like semiconductor chips and artificial intelligence, asset-backed securities linked to new-energy infrastructure, and emerging alternative assets such as private equity S-funds.

This transformation carries three layers of meaning. First, the quality of underlying investment targets is improving—the hard-tech companies receiving insurance capital represent the direction of the nation's strategic emerging industries. Second, with participating policies now dominant in the market, an insurer's asset allocation capability directly determines policyholders' variable returns. Third, insurers are putting real money behind their convictions, shifting their portfolios from "yesterday's steel and concrete" to "tomorrow's chips and computing power."

At its core, this asset migration reflects the proactive strategic transformation of insurance capital in a low-interest-rate era. The golden age of traditional non-standard investing has ended, and a new diversified allocation framework—anchored by equities, securitized assets, and technology innovation investment—is steadily taking shape through the flow of 40 trillion yuan. For industry professionals, grasping the underlying logic of this transformation is the single most powerful way to articulate policy value to clients.