The logic for long-term allocation of A-shares by insurance funds remains solid.

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■ Su Xianggao

Recently, some volatility has appeared in the A-share market, which has in turn raised market concerns: whether some small- and mid-sized insurance institutions might be forced to reduce holdings due to pressures on solvency and constraints tied to net value drawdowns—could this behavior amplify the market’s stage-by-stage turbulence, or even change the trend of insurance funds increasing their allocations to A shares over the long term?

Objectively speaking, when evaluating insurance funds’ investment behavior, we must strictly distinguish between an individual institution’s stage-based actions driven by liquidity management and the overall asset-allocation direction of the insurance industry. During periods of market volatility, some small- and mid-sized insurers make dynamic adjustments to their held equity assets to meet solvency requirements or to satisfy the real needs of asset-liability matching. In essence, this is normal risk-management behavior and does not represent the overall allocation direction of insurance funds. From a long-term perspective, the underlying logic for insurance funds to increase their allocations to A shares remains solid.

First, stage-based rebalancing is a normalized form of risk management, and it should not be extrapolated too far into an industry-wide trend.

Attributing some insurers’ recent de-risking behavior solely to the impact of solvency-capital regulatory rules has clear limitations. In fact, the “Notice of the National Financial Regulatory Administration on Matters Concerning the Extension of the Implementation Transition Period of Solvency II Regulatory Rules for Insurance Companies,” issued in December 2024, extends the relevant transition period to the end of 2025. This shows that capital-utilization pressure caused by changes in regulatory rules is a process that is gradually absorbed, and it has not created a concentrated shock at the current point in time.

Against this backdrop, for small- and mid-sized insurers with limited capital replenishment channels and relatively low risk tolerance, compressing exposures to high-volatility assets in stages to smooth financial statement fluctuations and ease capital consumption is a rational form of defense under pressure conditions. This behavior reflects the objective differentiation among institutions within the industry based on their endowments, and it cannot represent the general strategy of top insurers with strong capital strength and longer liability durations, or of annuity accounts. Inferring a systemic outflow of capital from the short-term tactical shrinkage of localized institutions is, logically, not tenable.

Second, the policy environment is continuously working to build the institutional foundation for “long-term money with long-term investment.”

In recent years, macro policy signals have been highly consistent in guiding and nurturing long-term investment forces. From multi-department joint issuance of implementation plans to promote long-term funds entering the market, which clearly call for increasing the proportion of commercial insurance funds’ investment in A shares, to this year’s “Government Work Report,” which further emphasizes “improving the mechanism for long-term funds to enter the market,” the core policy demand has consistently been to clear the bottlenecks that keep funds from entering the market and to optimize the ecosystem of the capital market. Therefore, when assessing insurance funds’ willingness for long-term allocation, it must be considered within this macro institutional framework. At present, the regulatory guidance supporting long-term funds in playing the role of institutional investors and encouraging cross-cycle investment has a high degree of certainty and continuity. Under predictable policy support, insurers’ exploration of an equity-allocation model aligned with high-quality development of the real economy has not changed its strategic direction.

Third, improvements to the assessment mechanism effectively alleviate constraints caused by short-term net value volatility.

To guide insurance funds to practice true value investing, the core is to eliminate the distortion that “short-term assessment” creates for “long-term investment” through mechanisms. In recent years, regulators have steadily advanced a series of institutional improvements—for example, gradually extending the performance assessment cycle for state-owned commercial insurance companies, increasing the weight of long-cycle assessments so as to reduce the assessment pressure caused by short-term performance fluctuations; at the same time, continuously optimizing the proportion-based regulation for insurance funds’ investments in equity-type assets. The essence of these arrangements is to effectively raise insurers’ tolerance for short-term market volatility by reshaping the “yardstick” of assessment. Once the assessment mechanism is properly aligned, the perspective of investment managers can shift from short-term game-based trading to long-term value discovery focused on company fundamentals, cash flows, and dividend capacity. The return of investment behavior toward steadiness and patience is an inevitable trend in the evolution of insurance funds’ investment philosophy.

Finally, increasing allocations to equity assets is an objective requirement for insurance funds to prevent the risk of loss from interest-rate spread.

From the internal operating logic of an insurance company, appropriately allocating to equity assets is a rigid demand of asset-liability management. Insurance funds (especially life insurance funds) have distinctive characteristics: relatively rigid liability costs and generally longer duration. In a global and domestic macroeconomic environment characterized by a low-interest-rate cycle, the yield to maturity of traditional fixed-income assets continues to decline, and the pressure to cover the costs of long-term liabilities becomes increasingly prominent. Faced with this objective challenge, it has become an important approach for insurance funds to achieve effective asset-liability matching and prevent the risk of loss from interest-rate spread by allocating to equity assets to obtain risk premia and cross-cycle returns. Based on industry-level actual data, as of the end of last year, insurance funds’ holdings in stocks and securities investment funds still remained at a relatively high level, which fully indicates that equity investment has become a key component for insurance funds to enhance the elasticity of investment returns and to stabilize the foundation of their portfolio.

In summary, the tactical defenses of some institutions are normal tools of market games and risk control, and we must avoid drawing sweeping conclusions from partial cases. From a long-term perspective, the logic behind insurance funds increasing their allocations to A shares still remains solid.

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