Core Viewpoint - The new regulatory framework for insurance companies aims to enforce a unified decision-making framework for asset allocation, product design, and risk management, addressing the historical disconnection between asset and liability management in the industry [1][2]. Regulatory Changes - The new regulation, effective from July 1, 2026, introduces a three-pronged approach to asset-liability management, emphasizing governance, quantitative indicators, and comprehensive management requirements [1]. - The evaluation period for cost-benefit indicators has been extended to 3-5 years, promoting long-term operations and patient capital within the insurance sector [2]. Impact on Large Insurers - Major insurers like China Life, Ping An, and China Pacific have already established robust asset-liability management mechanisms, positioning them favorably under the new compliance requirements [2][3]. - China Ping An's effective duration gap is reported at -2.6 years, indicating compliance with the new thresholds, while other major players are also narrowing their duration gaps [3]. Challenges for Small and Medium Insurers - Smaller insurance companies face significant challenges due to the new mandatory duration matching requirements, which compel them to invest in lower-yield long-term bonds, potentially leading to a mismatch between investment returns and high liability costs [4][6]. - The historical reliance on high-cost liabilities for growth has left many small insurers vulnerable, as they struggle to adapt to the new regulatory environment [6][7]. Industry Data and Trends - Data from the China Insurance Asset Management Association indicates that the average duration gap for the life insurance industry has been widening, with small insurers showing even greater discrepancies from regulatory requirements [7]. - The new regulations are expected to trigger a wave of mergers and acquisitions among small insurers, as many may not survive the stringent compliance demands [17]. Organizational Changes - The new regulations necessitate a fundamental restructuring of insurance companies' internal governance, with a clear delineation of responsibilities for asset-liability management [8][9]. - The asset-liability management department will become the strategic core of insurance companies, shifting the focus from a liability-driven to an asset-driven approach in product design [8][9]. Long-term Industry Outlook - The new regulatory framework is anticipated to catalyze a transformation in the insurance industry, moving away from a focus on scale to a model emphasizing high-quality, sustainable growth [17]. - The rigorous compliance requirements will likely lead to a significant consolidation in the market, favoring larger, more capable insurers while challenging the survival of smaller firms [17].