Did Mid-to-Small Insurance Funds Reduce Holdings Causing the Sharp Drop? Multiple Parties Deny Rumors—What's the Real Story?

“Small and medium-sized insurance companies are really taking the blame.” On March 20th, an insurance industry insider commented on a widely discussed analysis.

Regarding the recent decline in the A-share market, some market analysts attribute the main cause to the reduction of holdings by small and medium-sized insurance funds. They believe that under the full implementation of the second-generation solvency regulation and the recent simultaneous decline in stocks and bonds, these insurers face solvency pressures at the end of the quarter and thus reduce their holdings, including annuities. This explanation quickly drew widespread attention in the capital market.

However, reporters from Securities Times have learned from industry insiders and research institutions, including non-bank teams listed in New Fortune, that the recent market decline is unlikely to be primarily caused by insurance capital.

An insurance industry insider explained the quarter-end operational behavior of small and medium-sized insurers and its true impact. He stated that these insurers generally face some solvency pressure, and because the risk factor for equity asset solvency is high, they need more minimum capital. Therefore, some companies appropriately reduce their equity holdings at quarter-end to release capital and improve solvency levels. “But overall, the recent market correction hasn’t been very large, and the impact is minor.”

Several research institutions also analyzed data and survey information from multiple angles to clarify or deny that insurance capital was the main reason for the recent market decline.

The non-bank team at Dongwu Securities provided three reasons:

1. The rumored new solvency policy has not yet been implemented. The transitional policies of the second-generation solvency regulation, which have already been in effect, are expected to end, but the third phase of the new accounting standards for solvency regulation is still in testing and has not been implemented, so it will not affect insurance capital behavior.

2. Some small and medium-sized insurers have indeed reduced holdings, which is normal and has little overall impact on insurance capital. The insurance industry is highly concentrated, with large leading companies holding most of the investment assets and maintaining stable operations and investments. While some small and medium-sized companies are reducing holdings due to solvency pressures, this is normal industry behavior, and their share of total funds is very low, making it unlikely to significantly impact the stock market.

3. The industry’s overall liabilities are increasing significantly, and insurance capital is more likely to increase than decrease. By 2025, the insurance industry’s investment assets are expected to grow by 5 trillion yuan. Since 2026, under the “deposit relocation” trend, new insurance premiums have shown strong growth, creating ample new capital supply. The team estimates that the scale of insurance capital increase will surpass reductions, and market decline is not the main cause.

Hua Chuang Financial team straightforwardly stated that the decline should not be blamed on small and medium-sized insurers. They analyzed from three perspectives:

1. On the information front, equity holdings are more concentrated in large and medium-sized insurers because these companies have stronger solvency and regulators have been actively guiding long-term funds into the market. According to their frequent surveys, there has been no obvious reduction in holdings by large, medium, or small insurers since the beginning of the year; some institutions have even slightly increased their holdings.

2. On the policy front, the second phase of the second-generation solvency regulation was announced at the end of 2021, with a three-year transition period (2022–2024) during which relaxed policies were introduced to improve solvency. The regulation was further extended by one year in 2025. This year, regulators have not issued any statements indicating the continuation of the transition period, so the industry is prepared and unlikely to suddenly cut holdings due to recent assessments.

3. On the trading front, the team estimates the total stock holdings of the industry at about 3.5 trillion yuan, with large leading companies holding around 3 trillion yuan, and small and medium-sized companies about 500 billion yuan. The proportion of companies with solvency issues that might sell stocks is very low. Even in an extreme scenario where 10% of holdings are sold (about 50 billion yuan), it would still be significant. Considering the daily market turnover exceeds 2 trillion yuan since February 28, such a sale volume would not be enough to explain the market decline, making the data unlikely.

The non-bank team at Zhongtai Securities analyzed the recent volatility in the stock and bond markets and its impact on insurance capital. They noted that at the beginning of last year, the China Securities Regulatory Commission encouraged large state-owned insurers to allocate 30% of their new premiums annually to A-shares. Their estimates suggest that by 2025, the combined stock investments of insurance funds could increase by nearly 1.6 trillion yuan. Based on index fluctuations, about two-thirds of this increase is attributed to market value gains, and one-third to active increased holdings. For 2026, under neutral assumptions, the estimated incremental funds amount to about 713.3 billion yuan.

Regarding concerns about the behavior of small and medium-sized insurance funds, their analysis cites a large life insurer disclosure: a 10% decline in fair value of equity assets would impact the core solvency ratio by about 8.7 percentage points. As of the end of Q4 2025, the average core solvency adequacy ratio in the life insurance industry was about 115% (with a regulatory minimum of 50%). Objectively, some small and medium insurers may face certain performance pressure, but the introduction of the risk factor for stock investments in the second-generation regulation includes countercyclical adjustments, reducing the impulse for insurers to chase gains or cut losses.

The Zhongtai Securities non-bank team believes that for large insurers with over 70% of their funds and having implemented the new standards by the end of 2025, the actual pressure to reduce holdings is not significant.

(Article source: Securities Times)