Zhongtai Securities Co.,Ltd. has released a research report indicating that the benchmark study value for insurance product pricing rates has risen for two consecutive quarters, making a mid-term surge in sales due to anticipated product withdrawals unlikely. Since late June, the sector has shown a pattern of 'three steps forward, two steps back,' with its bottom range gradually lifting. A rebalancing of capital flows is expected to continue, and anticipated positive interim results are set to boost sector investment enthusiasm in July. This year, the insurance sector's performance rhythm has notably diverged from the broader market. Against a backdrop where technology and growth stocks have clearly dominated, the undervalued insurance sector has failed to attract significant capital. The firm maintains that the overarching logic for the sector remains unchanged: short-term relief from selling pressure, mid-term uplift in value and profit growth driven by 'deposit migration and a sustained bull market,' and long-term resolution of spread loss concerns as the economic cycle improves. The long-term foundation for the insurance sector lies in deposit migration on the liability side and a persistent bull market on the asset side.

Zhongtai Securities Co.,Ltd. outlines its primary views as follows:

Key Development

On July 21st, the Insurance Association of China convened the second-quarter 2026 meeting of its Life Insurance Industry Interest Rate Research Expert Advisory Committee. The meeting concluded that the current benchmark study value for the assumed interest rate of standard life insurance products is 1.94% (previously 1.93%). This marks the first time since the data's disclosure that the value has increased for two consecutive quarters, with a cumulative rise of 5 basis points. The firm's own calculation yielded a result of 1.91%. The trend of volatile but upward movement in long-term interest rates was gradually established in the second half of 2025. Although there was a correction in the first half of 2026, the likelihood of breaking previous lows is not high, indicating a bottoming and recovery in the external environment. In early 2025, the National Financial Regulatory Administration issued a notice on establishing a linkage and dynamic adjustment mechanism between assumed interest rates and market rates, aiming to guide companies to strengthen asset-liability linkage and adopt scientific, prudent pricing. The notice explicitly states that the benchmark assumed interest rate should be determined with reference to long-term rates such as the 5-year LPR, the 5-year time deposit benchmark rate, and the 10-year government bond yield, and is to be published quarterly by the Insurance Association. As of the end of the second quarter of 2026, the 5-year LPR was 3.5% (unchanged from Q1), the 5-year time deposit benchmark rate was 1.3% (unchanged from Q1), and the 10-year government bond yield was 1.73% (down 8.4 basis points from Q4 2025). However, according to the calculation formula, the study value's base return level involves 250-day and 750-day moving averages. The trend-driven recovery in long-term rates in the second half of 2025 has led to a sustained recovery in the study value. Since the initial disclosure of the assumed interest rate study value in the fourth quarter of 2024, the changes over the last six periods have been -21 bps, -14 bps, -9 bps, -1 bps, +4 bps, and +1 bps, respectively. The rate of decline has progressively narrowed, culminating in the first instance of warming for two consecutive quarters.

Committee's Stance and Focus

The Life Insurance Industry Interest Rate Research Expert Advisory Committee for the second quarter of 2026 continued its positive and affirming tone, particularly highlighting the resilience of the macroeconomy. The meeting's thematic discussions focused on capital market observations and AI applications (compared to global investment strategies under geopolitical backgrounds in Q1). In the section on expert views within the insurance industry, content related to 'vigorously promoting the high-quality development of pension finance and commercial health insurance' and 'continuously strengthening asset-liability management' was removed. Newly added was the emphasis on 'focusing on core responsibilities and solidly advancing the five major areas of finance.' This meeting extended the positive affirmations from the first quarter and stressed macroeconomic resilience, omitting the previous quarter's description of challenges such as 'still facing issues like strong supply versus weak demand and external shocks.' It noted that 'business activity indices for sectors like monetary and financial services, and insurance are in relatively high expansionary territory, new growth drivers are developing rapidly, and livelihood safeguards are effective.'

Projections and Product Trends

If market interest rates remain unchanged, the firm's simulated projection for the year-end 2026 assumed interest rate study value is 1.86%. Attention is drawn to the differentiated matching of assumed and illustrated interest rates for participating insurance products. With the first-quarter 2026 study value at 1.94%, the gap to the maximum allowed assumed rate for currently sold standard life products (2.0%) is only 6 basis points. This does not trigger the previously stipulated regulatory threshold condition of 'exceeding by 25 basis points or more for two consecutive quarters.' Based on the firm's calculations, if subsequent government bond yield curves, 5-year time deposit rates, and the 5-year LPR maintain current levels, the simulated projected study value for year-end 2026 would be 1.86%. Therefore, a mid-term adjustment to the upper limit for new product assumed interest rates appears unlikely. However, it remains possible for regulators to make comprehensive considerations based on subsequent stock and bond market volatility and the operational conditions of insurance companies themselves. Previously, some insurers launched participating products with an assumed interest rate of 1.25%, indicating differentiated business strategies in the high-quality development phase. The upper limit for the illustrated interest rate on participating products was lowered from 3.9% to 3.5% before June 30th. The firm anticipates that insurers may subsequently, during the pricing stage for participating products, match differentiated illustrated interest rate levels with varying assumed interest rates to better achieve a return combination of 'low guaranteed base with high potential float.'

Associated Risks

Key risks include a decline in product attractiveness and increased sales difficulty due to lower assumed interest rates, potential deviations between research report calculations and actual outcomes, and risks related to untimely information updates.