March 21, 2026 (InvestinChina.asia) — Reports that small and mid-sized Chinese insurers have been offloading equity holdings due to solvency pressure are overblown, according to multiple insurance industry insiders, who say isolated portfolio adjustments have had a negligible impact on the broader market and that the sector’s long-term trend of increasing equity exposure remains firmly intact.
The claims, which circulated amid a volatile stretch for A-shares, suggested that new solvency regulations were forcing smaller insurers to cut equity positions — and that this was a primary driver of recent market turbulence. Industry participants pushed back sharply on that narrative.
“The Phase III solvency rules are still being formulated. There is no clear timeline for implementation,” one insurance company executive told Cailian Press, adding that the characterization of regulatory-driven selling was inaccurate.
Solvency Rules: Phase II in Force, Phase III Still Years Away
The regulatory backdrop is more nuanced than the market chatter implied. China’s Phase II solvency framework — formally known as the “C-ROSS II” rules — was issued in December 2021 and has been in full effect since 2025, following an extended transition period. A further extension to the end of 2025 was granted in December 2024 to allow institutions more time to absorb the impact of the regulatory shift.
Phase III, which would be aligned with new accounting standards, remains under development. “We expect Phase III implementation no earlier than 2027,” said a chief non-bank analyst at a domestic brokerage. A chief investment officer at a joint-venture life insurer confirmed that a draft consultation document for Phase III has yet to be circulated.
“If Phase III were implemented now, it would actually ease pressure on insurers — the pressure exists precisely because Phase III hasn’t landed yet,” the executive added.
Several industry participants noted that regulators have consistently calibrated the pace of policy implementation to macroeconomic conditions. “The track record shows that supervisory rules are rolled out with full consideration of the macro environment and how institutions are actually feeling the impact,” said one investment executive at a mid-sized insurer. “Even when policies do take effect, there is always an adequate adaptation period.”
Small Insurers, Small Footprint
Even setting aside the regulatory timeline, industry insiders argued that the market impact of any selling by smaller insurers would be inherently limited.
“There are certainly some insurers trimming positions to protect their solvency ratios, but attributing the market decline entirely to that is an exaggeration,” said the general manager of a bank-affiliated insurance asset management firm.
The concentration of the industry tells the story: the seven major A- and H-share listed insurers — China Life, Ping An, CPIC, PICC, New China Life, China Taiping, and Sunshine Insurance — collectively managed RMB 21.85 trillion in insurance funds as of mid-2025, representing 60.3% of the industry total. Their equity portfolios alone reached RMB 2.05 trillion, a net increase of RMB 431.3 billion from the start of 2025, accounting for 67.4% of the industry’s total net equity increase.
“Large insurers dominate the industry’s investable assets. Even if some smaller players reduce equity exposure, the market impact is very limited,” said the chief risk officer of a leading insurance asset manager.
The Bigger Picture: Structural Inflows Intact
The broader trajectory of insurance capital into equities remains upward, driven by structural factors that dwarf any near-term solvency-related selling.
Total insurance fund utilization reached RMB 38.48 trillion at end-2025, up 15.7% year-on-year — a net increase of more than RMB 5 trillion over the year. Life insurers, which hold the longest-duration liabilities, accounted for RMB 34.66 trillion of that total. Their equity allocations rose to RMB 3.51 trillion, up more than RMB 1.2 trillion for the year, pushing the equity allocation ratio to 10.12% — a record high, up 2.55 percentage points year-on-year.
“The trend of insurers increasing equity exposure has not changed,” said an equity investment executive at a Shanghai-based insurance asset manager, citing the backdrop of a gradual equity bull market in the second half of last year and persistently low bond yields that have made fixed-income alternatives less attractive.
Seasonal dynamics also support near-term inflows. “The first quarter typically accounts for around 40% of annual premium income. That capital usually enters its peak deployment phase after the Two Sessions in March, once policy signals are clear,” the executive noted. “Premium growth has also been strong in 2026, driven by a shift of savings out of bank deposits, creating a substantial pool of fresh capital to deploy.”
A broader market analyst offered a measured assessment of the recent A-share weakness: “This week’s correction was not caused by any single factor. It reflects a confluence of domestic and external pressures, compounded by sentiment. Investors should not be overly pessimistic — structural opportunities will emerge once the risk-off phase runs its course.”