The decline in the guaranteed interest rate of dividend insurance is an inevitable trend

◎ Reporter He Kui

Recently, China Life launched a dividend insurance product with a minimum guaranteed interest rate of 1.25%, which is 50 basis points lower than the 1.75% guaranteed interest rate of mainstream market dividend insurance products, sparking market discussion.

Unlike previous industry-wide reductions in guaranteed interest rates, this round of adjustments is a voluntary action by some insurance companies. Additionally, the latest research value for the guaranteed interest rate of ordinary personal insurance products is 1.89%, which has not triggered the dynamic adjustment mechanism for guaranteed interest rates. Therefore, the current upper limit for dividend insurance guaranteed interest rates remains at 1.75% since Q3 2025. The “1.75% minimum + floating dividends” dividend insurance remains the market mainstream.

From this perspective, some insurers launching dividend insurance with a guaranteed interest rate of 1.25% at this time clearly involves lowering product attractiveness and market competitiveness. Several factors may influence this decision:

First, considerations of spread loss. Selling dividend insurance incurs lower liability costs compared to traditional insurance types. However, against the backdrop of declining market interest rates, insufficient supply of high-quality equity assets, and decreasing non-standard investment yields, insurance companies face increasing investment pressure and higher asset-liability matching requirements. International and historical experience shows that proactively lowering the guaranteed interest rate of insurance products reduces liability costs and is a key measure for insurers to actively manage spread loss risks. This is especially urgent for small and medium-sized insurers with higher potential spread loss risks, as they need to lower liability costs more urgently.

Second, capital occupation issues. Under the Solvency II second phase rules, dividend insurance requires higher capital occupation, leading insurers to need more capital to support dividend insurance business development. For small and medium insurers under solvency pressure, blindly following larger insurers in developing dividend insurance may increase their solvency pressure. As a result, insurers may choose to lower the guaranteed interest rate of dividend insurance to actively “slow down” growth.

Third, related to shareholder interests. According to regulatory requirements, when determining the distributable surplus for each dividend insurance account, insurers must follow generally accepted actuarial principles and adhere to principles of supportability and sustainability. The proportion allocated to policyholders must not be less than 70% of the distributable surplus. This means shareholders can receive no more than 30%. Especially when investment performance is strong, dividend insurance has a greater impact on shareholder interests compared to traditional insurance, potentially leading to policyholders receiving more floating income while shareholders receive less.

Fourth, customer needs must also be considered. As deposit interest rates continue to decline, residents shifting deposits to insurance products present a historic opportunity for sales. The significant growth in premium income through bancassurance channels in recent years is strong evidence. However, different customers have different risk preferences and expectations for insurance product yields. Multi-rate product designs can effectively match diverse customer needs—for example, products with “low guaranteed + high floating” are more suitable for risk-tolerant customers.

Analyzing these factors, it is not difficult to understand that lowering guaranteed interest rates may not be a bad thing for some insurers. In fact, the downward trend of guaranteed interest rates for dividend insurance is inevitable. Several insurers have already completed the filing and reserve setup for dividend insurance products with a guaranteed interest rate of 1.25% and plan to launch them when appropriate.