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].

1. Report's Industry Investment Rating No relevant information provided in the report. 2. Core Views of the Report - In 2026, with insurance companies' asset - liability management focusing more on "income coverage ratio", the investment side may show a pattern of "holding local government bonds as the bottom - position, a structural differentiation in the demand for treasury bonds, and a rebound in the willingness to allocate secondary and perpetual bonds". Insurance companies' choices of specific bond types may show structural differentiation [2][24]. - The Financial Regulatory总局 issued the "Measures for the Asset - Liability Management of Insurance Companies (Exposure Draft)" in December 2025, which reconstructs regulatory indicators and governance standards, shifting the regulatory logic from "score - oriented" to "threshold management" [4][10]. - In 2026, as the insurance industry accelerates the transformation to floating - income products such as dividend - paying insurance and the regulatory focus shifts to effective duration, the liability duration of insurance companies may decline structurally, and the pressure on asset - liability duration matching at the indicator level of life insurance companies may be further alleviated [4][18]. - Looking forward to the year - end market, abundant liquidity may maintain the short - end advantage, while the long - end needs to focus on whether the pricing is gradually dominated by allocation funds. Investment strategies should consider the balance between odds and win - rates [6][114]. 3. Summary According to the Table of Contents 3.1 ALM Regulatory Update and Insurance Company Behavior Changes - The "Measures for the Asset - Liability Management of Insurance Companies (Exposure Draft)" was issued in December 2025, integrating previous regulatory measures and rules, and reconstructing regulatory indicators. The regulatory logic shifts from "score - oriented" to "threshold management", and "effective duration gap" is established as the core regulatory indicator for life insurance companies [4][10]. - In 2025, the overall asset - liability duration gap of the insurance industry narrowed, but some small and medium - sized insurance companies faced an expansion of the duration gap. In 2026, the liability duration of insurance companies may decline structurally, and the focus of investment may shift to income coverage [14][18]. - In 2026, the investment side of insurance companies may show a pattern where local government bonds are the bottom - position, the demand for treasury bonds is structurally differentiated, and the willingness to allocate secondary and perpetual bonds rebounds [2][24]. 3.2 Important Matters - In December 2025, the central bank conducted a net injection of 200 billion yuan through 6 - month term repurchase agreements, with the 6 - month term repurchase balance reaching 3.7 trillion yuan [29]. - From January to November 2025, the national general public budget revenue was 20.0516 trillion yuan, a year - on - year increase of 0.8%. The expenditure was 24.8538 trillion yuan, a year - on - year increase of 1.4% [31]. - In December 2025, the Federal Reserve cut interest rates by 25 basis points to a target range of 3.5% - 3.75%. The Bank of Japan raised interest rates by 25 basis points to 0.75% [34][37]. 3.3 Money Market - The central bank restarted 14 - day reverse repurchase operations last week, with a net injection of - 1.1 billion yuan. The money market remained relatively loose, with DR001 below 1.3% throughout the week [38][40]. - The issuance scale of inter - bank certificates of deposit (ICDs) last week was 995.79 billion yuan, with a net financing of - 67.06 billion yuan. The issuance cost of state - owned banks increased, while the secondary - market yields of ICDs declined [46][53]. 3.4 Bond Market - In the primary market, the supply scale of interest - rate bonds decreased last week, with an actual issuance of 376.127 billion yuan, a maturity of 347.33 billion yuan, and a net financing of 28.797 billion yuan [56][63]. - In 2025, the net financing scale of national and local government bonds increased significantly. As of December 19, the net financing of national bonds was about 6.23 trillion yuan, and that of local bonds was about 7.11 trillion yuan [58]. - In the secondary market, ultra - long - term bonds fluctuated widely, while short - term interest rates performed well. The yields of various - term treasury and policy - bank bonds changed, and the liquidity premium of active bonds was relatively stable [70][78]. 3.5 Institutional Behavior Tracking - In November 2025, the leverage ratios of banks, securities firms, and other institutions decreased non - seasonally. The leverage ratio of all institutions in the inter - bank market was about 118.04% [87][88]. - Last week, state - owned banks increased their holdings of treasury bonds with maturities of less than 5 years and policy - bank bonds with maturities of 5 - 10 years; rural commercial banks increased their holdings of treasury bonds with maturities of more than 10 years; insurance companies bought long - term treasury and local government bonds; securities firms sold long - term treasury bonds; and funds adjusted their portfolios to shorten the overall duration [87][100]. 3.6 High - Frequency Data Tracking - Last week, the settlement prices of rebar and wire rod futures increased, while the settlement price of cathode copper futures decreased. The cement price index and the Nanhua Glass Index increased. The CCFI index rose, and the BDI index fell [110]. - The wholesale prices of pork increased slightly, while the wholesale prices of vegetables decreased. The settlement prices of Brent crude oil and WTI crude oil futures decreased. The central parity rate of the US dollar against the RMB was 7.06 [110][113]. 3.7 Market Outlook - Looking forward to the year - end market, abundant liquidity may support short - term bonds, while long - term bonds may face short - term fluctuations. As the static yield of ultra - long - term treasury bonds rises, allocation funds may gradually enter the market [6][114]. - Investment strategies suggest gradually building positions in ultra - long - term bonds for odds, but it is recommended to prioritize medium - and short - term treasury and policy - bank bonds and pay attention to trading opportunities of secondary and perpetual bonds with the same maturities. The overall portfolio duration should be controlled in the medium - to - long range of 5 - 7 years [6][114].