Core Viewpoint - The implementation of a dynamic adjustment mechanism for the predetermined interest rate of life insurance products will officially begin in January 2025, with the initial research value set at 2.34%. This mechanism may trigger adjustments to the predetermined interest rates and product offerings if the maximum predetermined interest rate exceeds the research value by more than 25 basis points for two consecutive quarters [1][2]. Group 1: Regulatory Framework - The regulatory authority has emphasized the importance of guiding the predetermined interest rates for life insurance products, with a notification issued in August 2024 to adjust the upper limit of these rates and establish a dynamic adjustment mechanism linked to market rates [2][3]. - The China Insurance Industry Association will regularly organize meetings to evaluate and publish the predetermined interest rate research values quarterly, enhancing the dynamic adjustment mechanism for life insurance products [2][3]. Group 2: Determination of Research Value - The predetermined interest rate research value is determined using a specific formula that incorporates the 5-year Loan Prime Rate (LPR), 5-year fixed deposit rates, and 10-year government bond yields, along with industry asset-liability management considerations [3][4]. - The basic return level is calculated using a formula that averages the 10-year government bond yield and tax premium over 250 and 750 days, reflecting the differences in yields between government bonds and policy financial bonds [3]. Group 3: Impact on Insurance Products - Changes in the predetermined interest rate research value will significantly affect the pricing and availability of life insurance products, potentially leading to the withdrawal of certain products if the rates are adjusted downward [5][6]. - The anticipated decline in the predetermined interest rate could result in increased prices for life and health insurance products, with a potential "preemptive halt" in sales to manage demand before the adjustment [6].

Core Viewpoint - The insurance industry is preparing for a significant shift towards dividend insurance products as the maximum guaranteed interest rates for life insurance are set to decline, reaching historical lows [2][4][10]. Summary by Sections Regulatory Changes - The maximum guaranteed interest rate for ordinary life insurance products has been lowered from 2.5% to 2.0%, and for dividend insurance from 2.0% to 1.75%, effective August 31 [2][3][4]. - This adjustment is a response to the current research value of 1.99%, which is below the previous quarter's 2.13%, triggering the need for a rate cut [3][4]. Industry Response - Major insurers like China Life, Ping An, and China Pacific have announced the rate adjustments, indicating a likely industry-wide response [2][3]. - Insurers have been preparing for this change, with product managers stating they have multiple product plans ready to adapt to the new rates [2][8]. Market Dynamics - The decline in guaranteed interest rates is expected to impact the cash value of ordinary savings-type products negatively, while it may lead to increased premiums for critical illness insurance [6][10]. - The shift towards dividend insurance is seen as a strategy to lower the rigid liability costs for insurers, as these products offer variable returns that can be more attractive in a low-interest environment [10][11]. Future Trends - The proportion of dividend insurance in total premiums is expected to rise significantly, with estimates suggesting it could exceed 50% across the industry [11][12]. - Insurers are focusing on enhancing market sensitivity and operational efficiency to navigate the challenges posed by the declining interest rates [12].

Core Viewpoint - The China Insurance Industry Association held a quarterly meeting regarding the assessment interest rate for life insurance liability reserves, revealing that the current preset interest rate for ordinary life insurance products has dropped to 2.13% [1][2]. Group 1: Current Interest Rate Trends - The preset interest rate research value has decreased below 2.25% for the first time, while the upper limit for traditional insurance products remains at 2.5% and does not require adjustment yet [1][2]. - The preset interest rate research value was initially announced at 2.34% in January, and the latest value of 2.13% exceeds the 25 basis points threshold compared to the previous value [2]. Group 2: Mechanism for Adjusting Interest Rates - The insurance industry is optimizing liability costs in response to declining interest rates, implementing a mechanism that links preset interest rates to market rates for dynamic adjustments [1]. - If the highest preset interest rate for ordinary life insurance products exceeds the preset interest rate research value by 25 basis points for two consecutive quarters, the new product's preset interest rate must be adjusted downwards within two months [1]. Group 3: Future Outlook - If the preset interest rate research value remains below 2.25% in the next quarter, the upper limit for insurance product preset interest rates will be reduced by at least 25 basis points [2]. - Insurance companies are closely monitoring macroeconomic conditions and the trend of preset interest rate research values to adjust product pricing and improve liability quality [2].