Capital constraints squeeze transformation space; small and medium insurance companies "disenchant" dividend insurance

Southern Finance & Economics Media Reporter Lin Hanyi Intern Xu Ruoxuan

In the spring of 2026, the story of dividend insurance taking the “C-position” has entered a new chapter.

Over the past two years, this floating yield product, once regarded by the entire industry as the “cure” for low interest rates, has made the leap from fringe to mainstream. Regulatory guidance, leading insurance companies’ promotion, and the revival of the capital market since 2024 have collectively propelled dividend insurance to the center stage of the industry.

In the first half of 2025, dividend insurance accounted for over 50% of new policies for most insurers, with some companies undergoing significant transformation exceeding 90%. A report from Far Eastern Credit Research pointed out that in 2025, the premium income of large insurers such as Taiping Life and New China Insurance saw a substantial increase in the proportion of dividend insurance, and the industry-wide consensus on “full shift to dividend insurance” has already formed.

However, as the noise of the spotlight gradually subsides, a calmer and even more divided reflection is surging deep within the industry. During interviews, reporters found that unlike the high-profile top institutions, more and more small and medium-sized insurers are beginning to “demystify” dividend insurance.

Conflicts with Shareholder Value Reduce Willingness to Follow Up

In 2025, when investment returns generally rebounded, a previously overlooked contradiction began to emerge within small and medium insurers. Dividend insurance was originally designed for “benefit sharing and risk sharing,” but this mechanism, when equity markets perform well, has instead become a financial burden for smaller insurers.

According to the “Regulations on Actuarial Standards for Dividend Insurance,” the proportion of dividends allocated to policyholders by insurance companies shall not be less than 70% of distributable surplus. This means shareholders can only share up to 30% of the earnings. Consequently, when an insurer performs well in investments, most of the profits actually flow to customers rather than shareholders.

Shi Zili, partner at Shizhi International Financial Industry Consulting, analyzed to 21st Century Business Herald that in the past two years, stock investments significantly boosted returns. The surplus distribution mechanism of dividend insurance, which shares profits while bearing risks, has lowered the rigid cost pressure on insurers but also reduces the potential benefits of achieving high investment returns later.

Far Eastern Credit Data shows that by the end of September 2025, insurance funds’ stock investments reached 3.62 trillion yuan, a substantial increase of 50% from the end of 2024, far surpassing the growth rate of other asset types. Against this backdrop, many insurance companies’ investment contributions to profits have increased in recent years. This change in profit structure directly impacts the product development logic of small and medium insurers.

For those with outstanding investment performance, they prefer to retain excess returns at the company level rather than distribute them to policyholders.

Ren Zili, vice president and secretary-general of the Insurance Law Research Association of the China Law Society and professor at Beihang University Law School, told 21st Century Business Herald that regulatory requirements that at least 70% of dividend surplus be returned to customers limit shareholder returns. Stronger investment capabilities tend to trigger doubts among shareholders.

Zili also pointed out, “Some small and medium insurers, optimistic about future investment returns, are reluctant to fully transform into dividend insurance.”

Meanwhile, the smoothing mechanism of dividend insurance also raises higher demands on insurers’ financial adjustment capabilities. Insurance companies store excess investment income and release it during downturns to ensure the stability of dividend distribution across cycles. For small and medium insurers, this short-term performance versus long-term operation game is highly challenging.

Ren Zili stated that small and medium insurers lack long-term investment performance support and smoothing reserves, making it difficult to stabilize dividend payout rates. If sales mislead customers, it could directly trigger reputational risks. This capability gap also makes small and medium insurers relatively cautious about transforming into dividend insurance.

Capital Constraints Limit Transformation Space

If shareholder returns concern internal stakeholder interests, then capital constraints are a visible red line determining whether small and medium insurers can participate in this game.

Although dividend insurance can effectively ease rigid payment pressures on the asset side, it is a “heavy asset” in terms of capital consumption. Zili said that dividend insurance consumes capital relatively more, and some small and medium insurers with tight solvency capacity cannot vigorously develop dividend insurance.

Data shows that by the end of Q4 2025, the average comprehensive solvency adequacy ratio of insurance companies was 181.1%, down 18.3 percentage points from the end of 2024. The core solvency adequacy ratio was 130.4%, down 8.7 percentage points. This decline in capital pressure is especially prominent in the life insurance industry. According to a research report from Zhongtai Securities, for small and medium institutions, capital replenishment channels are relatively narrow. Due to small business scale and unstable profitability, some companies’ solvency adequacy ratios are approaching regulatory red lines. However, due to low market recognition and limited financing channels, capital replenishment remains very difficult.

Ren Zili also shared a similar view. He believes that capital constraints are a major practical consideration for cautious small and medium insurers. Under the second-generation solvency regulation, the high capital occupation of dividend insurance further squeezes the already tight solvency margin.

Additionally, the professional barriers in asset-liability management also pressure small and medium insurers during their transition to dividend insurance. A chief analyst at a securities firm’s non-bank financial sector pointed out that dividend rates are positively correlated with expected investment returns, which are closely related to market performance and investment capabilities. For small and medium insurers, their investment teams, risk control, and capital strength are not comparable to large insurers, making it difficult to push forward with dividend insurance investments.

Zili noted that small and medium insurers face greater challenges than large companies in cost control, investment capacity, and capital replenishment channels. In terms of dynamic asset-liability management and balancing capabilities, their talent and technological strength lag behind large firms.

Ren Zili believes this divergence is not a short-term fluctuation caused by declining interest rates but a profound, long-term structural reshaping of the life insurance industry. Over the past decades, the industry has followed a “high interest rate, high guarantee, scale-driven, channel-driven” extensive model. Now, it is entering a new stage of “low interest rates, strict regulation, heavy capital burden, and emphasis on stability.” Dividend insurance, aligning with declining interest rates and regulatory guidance, will become a mainstay of long-term savings. However, future competition in dividend insurance will shift from “guaranteed interest rates” to “investment ability, dividend stability, and operational robustness.” The resource barriers of leading insurers will continue to strengthen, intensifying the Matthew effect.

A senior analyst from a securities firm’s non-bank financial sector further stated that, in the long run, the Matthew effect will be the main trend across various segments. With the development of AI and increased regulatory focus on risk control, this trend will accelerate, and the market share of small and medium insurers is likely to continue shrinking.

Dividend Insurance Competition Returns to “Long-term Trust”

In fact, the obstacles preventing small and medium insurers from vigorously embracing dividend insurance are not only internal capital constraints and shareholder interests but also the implicit thresholds of clients that are hard to cross. As the core logic of savings insurance shifts from “rigid payment” to “floating returns,” the essence of this competition evolves into a battle for “long-term trust.”

Dividend levels heavily depend on insurers’ long-term investment capabilities and profit distribution policies. Customers are essentially buying trust in the insurer’s future credit performance. Zili pointed out that large insurers can continuously attract high-end savings customers through their brand, channels, and dividend strength.

Small and medium insurers, due to limited brand influence and lack of long-term dividend performance verification, have natural concerns about the sustainability of dividend payments over decades. How to bridge this trust gap? Ren Zili suggests that small and medium insurers need to cultivate three core capabilities:

First, ultimate professionalism and transparency. Establish clear product information disclosure mechanisms, explain coverage, claims processes, and risk warnings in simple terms, minimize or eliminate sales misguidance, and win customer recognition through professionalism.

Second, stable and efficient service and claims capabilities. Trust in insurance mainly manifests in the claims process. Small and medium insurers may be at a disadvantage compared to top brands, but they can compete on service timeliness, attitude, and certainty. For example, leveraging technology to create small-claim direct payments, quick claims, and clear procedures for complex cases, prioritizing insureds within rules, and building reputation through reliable claims experiences.

Third, deep cultivation of specific scenarios. Instead of competing with top insurers on “full market, all demographics,” they should focus on serving specific customer groups, scenarios, or regions—such as seniors, children, new residents, flexible workers, or small micro-enterprises—offering integrated “insurance + services” solutions like chronic disease management or medical green channels, establishing irreplaceable trust through differentiated value.

Deepening Differentiation to Build “Moats”

Faced with the strong position of large insurers in the mainstream savings market, small and medium insurers are seeking differentiated survival paths.

Zili pointed out that small and medium insurers, lacking advantages in brand, channels, and investment capacity compared to large firms, often compete through high-cost models. This extensive competition cannot sustain after the implementation of “reporting and operation integration.” Therefore, they must focus on特色化经营和差异化竞争。无论是细分客群和需求，还是产品错位和服务创新，都是在新形势下的必由之路。

转向健康险、意外险等保障型业务，为中小险企提供了差异化的发展空间。

任自力分析认为，保障型业务对中小险企既是机遇也是挑战。其机遇在于，保障业务符合“保险姓保”的监管导向，市场需求随着健康中国战略的推进持续增长，且头部险企难以完全覆盖所有细分场景（如县域普惠医疗、特定职业意外险），中小险企可以通过场景化、定制化产品切入蓝海。此外，保障业务的资本占用较低、利润结构更稳健，有助于缓解资本压力。

不过，券商非银首席分析师也提醒，在当前收入、预期收入和财富效应尚未出现明显拐点前，无论是大型险企还是中小险企，面对高价值、高价格的健康险产品都难以快速突破。相较之下，中小险企空间更有限，因为其产品线、定价能力、议价能力和渠道都处于劣势。

周瑾认为，中小公司弹性也是一种优势。其体量小，存量业务负担轻，若能建立灵活机制，应对市场剧烈变化更具弹性。通过快速调整产品结构和定价机制，抓住资本市场机会，也有望更快摆脱利差损压力，在新市场格局中找到位置。

展望未来三到五年，中小险企的产品策略将趋向进一步差异化，而非趋同。任自力判断，部分资本和能力较强的中小险企，将聚焦细分储蓄或保障赛道，打造特色产品矩阵；多数机构则被迫收缩战线，深耕区域或特定客群，走“小而美”路线；缺乏核心能力的机构可能会逐步退出市场。

(编辑：钱晓睿)

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