When Deposits Flow into Insurance: How Life Insurance Carries the Migration of Long-term Funds

```

Since the start of 2026, the insurance market has been sending out two key signals in rapid succession.

First, asset-side pricing indicators have initially stabilized:

On April 24, the Insurance Association of China announced that the research value of the assumed interest rate for ordinary life insurance products stood at 1.93%. This data was up 4 basis points from January, reversing the previous continuous decline.

The current research value is only 7 basis points below the 2.0% cap for traditional insurance. As it has not triggered the 25 basis point adjustment threshold set by regulators, the probability of another cut in the upper limit of assumed interest rates for products on sale in the short term has significantly decreased, restoring industry expectations.

Second, premium income on the liability side has continued its growth momentum since 2025:

In the first quarter of this year, total premium income of the insurance sector reached 2.31 trillion yuan, of which life insurance companies took in 1.78 trillion yuan. Annuity insurance, endowment insurance, and whole life insurance with an emphasis on savings functions have been the main drivers of premium growth, maintaining a high share among some leading companies.

Behind the simultaneous stabilization and growth, there points to an ongoing structural shift in household wealth. Funds are flowing out from traditional savings channels into the insurance market.

Wealth Flow: Lowering of Interest Rate Center Reshapes Fund Distribution

Every collective shift in wealth has macro-cyclical drivers behind it.

Since 2025, households’ defensive savings mentality has become entrenched, with a notable trend toward term deposits. This has increased cost pressures on the liability side for commercial banks.

Data from the National Financial Regulatory Administration shows that by the end of the fourth quarter of 2025, the net interest margin of commercial banks dropped to 1.42%, with a full-year average of about 1.5%. As posted rates have been intensively lowered, the room for higher-cost funds has been squeezed, causing some funds to seek alternatives in the non-bank sector.

The two traditional capital channels—bank wealth management and public mutual funds—are facing challenges in the current market environment.

In the fully mark-to-market era, returns on wealth management products are directly tied to fluctuations in their underlying assets.

During the choppy market from 2025 to early 2026, fixed income wealth management products based on bonds and non-standard assets experienced more volatility in size. Some products saw net value withdrawals, changing part of investors’ perception of their stability.

According to the Wealth Management Registration and Custody Center of the banking industry, as of the end of Q1 2026, the market scale of wealth management products was 31.91 trillion yuan, down 1.38 trillion yuan from the end of 2025.

Yields were also under pressure, with the average annualized return on wealth management products in March at just 1.01%, down from 2.11% in February and 3.71% in January. The expansion of the wealth management market now faces resistance.

At the same time, performance of public equity funds is closely linked to the state of the capital market.

Confronted with continued volatility and style rotation in the stock market in recent years, fund performance has become polarized. The gap between fund returns and actual investor gains is eroding confidence. Fundraising for newly launched funds has cooled, and existing funds see a cycle of redemptions and new purchases.

Despite new fund launches exceeding 300 billion yuan in the first quarter, the total scale of public funds edged down from 37.64 trillion yuan at the end of 2025 to 37.52 trillion yuan at the end of Q1 2026.

Structurally, stock fund size fell by nearly 16% quarter-over-quarter, ETF market size shrank by more than 1 trillion yuan. The new fund market has a stronger head effect, and some products have faced fundraising difficulties, reflecting a change in investor expectations.

Against this backdrop, some mass-market investors have become more risk-averse. As core demand shifts from value appreciation to capital protection and stability, savings-type insurance products—with long-term locked-in rates, clear contractually stated returns, and auxiliary protection features—are beginning to play the role of market ballast.

These products have absorbed some deposits withdrawn from the banking system and funds waiting on the sidelines for wealth management and mutual funds, showing a certain degree of capital aggregation effect. The spread of risk aversion has made certainty the scarcest asset in the current market.

Asset-Liability Struggle: Hidden Risks After Influx of Long-Term Capital

Prosperity on the liability side often masks hidden risks in the asset cycle. The influx of long-term funds is a test of asset-liability matching for insurance companies.

With tight asset supply, high-quality corporate bonds and higher-yield non-standard assets are relatively scarce. Although there has been some marginal improvement in long-term interest rates, by April 2026, the 30-year government bond yield remains between 2.21% and 2.25%.

According to institutional estimates, the industry’s comprehensive liability cost for outstanding policies remains high. The mismatch between investment returns and liability costs makes spread loss a risk that insurance companies must confront.

Currently, the trend of household funds flowing into the insurance system is initially evident, but this is just one aspect of industry transformation.

In an environment of regularized dynamic adjustment mechanisms for assumed interest rates and pressure on asset-side returns, the insurance industry is gradually changing from its previous growth model, which relied mainly on unidirectional rate-driven expansion.

The industry is entering a new stage focused on refined asset-liability management, optimization of product structure, and enhancement of investment capabilities.

This movement of funds triggered by deposit outflow is not only a test of the insurance sector’s ability to absorb it, but also poses a long-term question to the entire financial system on how to rebalance risk, return, and liquidity in a low interest rate environment.

When the tide of high growth ebbs, the ability for refined operations is the trump card for financial institutions to outlast the cycle.

Risk Warning and DisclaimerThe market involves risks, and investments require caution. This article does not constitute individual investment advice, nor does it take into account any particular user's specific investment goals, financial situation, or needs. Users should determine whether any opinions, views, or conclusions in this article fit their particular circumstances. Investment based on this is at your own risk. ```