Special topic: Golden Pixiu 2026 7th Bancassurance Cooperation and Development Forum. With interest rates continuing to decline and the "reporting and acting in compliance" policy entering full-scope expense management, where do life insurers' profits come from, and how high is their cost of funds? The new insurance contract standard provides a line-by-line framework for comparison.
On September 22, 2026, the "Golden Pixiu" 2026 7th Bancassurance Cooperation and Development Forum and Bancassurance Awards Ceremony was held in Beijing. The forum was hosted by Yiqu Finance Media and Insurance Enterprise Senior Reference, under the theme "Offense and Defense, Harmony in Light." At the meeting, regulatory leaders and senior figures from banking and insurance held lively discussions on the development of bancassurance cooperation after Document No. 65.
Ma Qianlu, Deloitte China insurance industry leader, took the interpretation of statements under the new insurance contract standard as a starting point, analyzed the separation of insurance and investment profits and the identification of profit sources, and further introduced the accounting characteristics of participating insurance under the new standard.
Ma Qianlu explained that the new standard separately presents profits from insurance risk and investment risk, making it clear whether a life insurer's profit comes from insurance profit composed of mortality and expense margins or from investment profit composed of interest margin. Specifically for the accounting treatment of participating insurance, the new accounting standard follows logic similar to public fund management: all investment returns are accrued to the financial cost owed to policyholders, while the excess returns enjoyed by the company are included in the contractual service margin and released gradually in future years using a principle similar to floating performance fees.
Insurance and Investment Profits Shown Separately, Making Life Insurance Cost of Funds Clearly Visible
The new insurance contract standard was first implemented by listed companies in 2023 and is widely regarded as the "most complex" standard. The information content of statements under the new standard has indeed increased substantially compared with the old standard. Ma Qianlu said Deloitte's insurance team has continuously tracked listed insurers' statements since mid-2023, and the related analysis has been updated to its seventh edition. The focus of statement users is also changing. In the past, the market mainly looked at embedded value reports for life insurers; since 2025, many investment banks and brokerages have invited insurance experts to explain statements under the new insurance standard. Starting in 2026, the entire insurance industry will begin implementing the standard, further strengthening its impact.
Analysis of listed company data across years shows that the profit contribution from insurance risk is very stable and is the main component of profit. Leading insurers also have relatively abundant reserves in the contractual service margin. On the investment side, net profit fluctuates markedly, contributing considerable profit in good years, thinner profit in some years, and possibly losses in extreme years. For specific analysis of investment profit, the cost coverage ratio can be used. Ma Qianlu divides investment income by the cost of insurance funds, namely underwriting financial gains and losses, to obtain the cost coverage ratio. A ratio above 100% indicates a positive interest margin, while below 100% indicates a negative interest margin. This ratio has two measures: profit and comprehensive income.
Looking at the past three years, in 2023 most companies failed to exceed 100% under either measure, mainly because both the interest rate market and capital market weakened that year, making it a rare "extremely poor" year in the capital market. In 2024, most leading companies achieved a positive interest margin under the income statement measure, but because market interest rates fell significantly, pressure on the liability side increased, and most companies did not make money under the comprehensive income measure. Data for 2025 improved substantially, with most companies achieving profitability under both profit and comprehensive income measures, and in relatively large amounts. The above analysis shows that obtaining a positive interest margin is not guaranteed, and the cost of insurance funds should not be underestimated. Insurers' other comprehensive income amounts are relatively large, so attention should not be limited to the income statement; the comprehensive income measure should also be emphasized.
Based on rough estimates from listed companies' public information, the cost of funds for traditional life insurance products is generally around 3% to 3.5%. Ma Qianlu pointed out that the amount of insurance contract liabilities corresponding to traditional insurance fluctuates with market interest rates through discounting, with a fluctuation principle similar to the fair value of bonds. Life insurers have long liability cycles and large existing scale, so liability changes caused by interest rate fluctuations have a major impact on net assets.
Excess Returns from Participating Insurance Released Gradually
Participating insurance is currently a main product category in the life insurance market. Data from the Insurance Association of China show that in the first half of 2026, original insurance premium income from participating insurance reached RMB 1,012.6 billion, up 94.4% year on year, accounting for more than 60% of new single premiums in life insurance. Beyond excitement on the sales side, participating insurance also has a relatively special measurement logic under the new standard.
Ma Qianlu explained that the investment cost measurement of traditional insurance is more like corporate bonds, with the insurer paying policyholders the time value of money. Participating insurance includes a benefit-sharing arrangement: about 70% of the money earned in the participating insurance account belongs to policyholders. In accounting measurement, participating insurance is more like a public fund product issued by the company. All investment returns earned by the fund account are included in the cost owed to policyholders, while the 30% that should belong to the company is accrued through a method similar to a floating management fee and included in the contractual service margin, then released through amortization of the contractual service margin.
The difference in statements arises from this. Ma Qianlu gave an example: two companies each earn an extra RMB 10 billion in investment returns that year, assuming principal of RMB 100 billion. One sells participating insurance, and under accounting treatment the full RMB 10 billion return is included in the cost owed to policyholders, while the company's 30% is included in the contractual service margin and may not all be reflected in the current period. The other sells traditional insurance, and policyholders only need a 3% or 3.5% return, namely RMB 3 billion to RMB 3.5 billion, with the excess all appearing in the current income statement, so the increase in profit becomes visible.
Ma Qianlu mentioned that in 2026 some industry figures said that, under similar capital market performance, one main reason listed insurers showed different profit performance was the different proportion of participating insurance. The accounting measurement principle indeed produces such results. Ma Qianlu added a reminder that excess returns from participating insurance will not be lost; they are simply included in the contractual service margin and then released.
Participating insurance is more consistent with business development logic in a declining interest rate environment, also because the guaranteed interest rate is lower, and the company can return actual returns to policyholders through dividend declarations, achieving "adjustment according to market conditions." Ma Qianlu reminded that the premise for participating insurance being more conducive to sustainable company development in a declining interest rate environment is that the company declares dividends "within its means" based on actual return levels. If it distributes excessively in order to compete, that would instead be unfavorable to healthy business development.
Development Suggestions in a Declining Interest Rate Environment
China's interest rates have entered a sustained downward channel since 2022. In August 2026, the 1-year LPR was 3.0% and the 5-year-and-above LPR was 3.5%, both unchanged for 15 consecutive months, and market expectations for a low-interest-rate environment have not changed. Ma Qianlu believes that declining interest rates bring pressure to life insurers mainly in two aspects. The first is capital pressure. Life insurers' insurance contract liabilities are the result of ten or twenty years of long-term accumulation, and insurance contract liabilities need to be discounted based on the market interest rate at period end. As the discount rate declines, net assets come under enormous pressure. The second is long-term management of business cash flow, which Ma Qianlu calls the passivity of insurance business cash management, or the negative convexity of net assets.
Thirty years ago, China's market interest rates were at 10% or even 15%, and China Life and Ping An sold a batch of old policies promising high returns. Later, market interest rates fell to 5%, and the interest margin losses on that batch of policies continue to this day. This is mainly because life insurance policies have long life cycles, and as long as policyholders do not surrender, the policies continue. Insurers are similarly passive when interest rates rise. If market interest rates rise to 5% five years from now, policyholders will certainly choose to surrender products now issued with promised returns of around 3%, and the company will have no way to maintain the "interest rate rise dividend" of easily honoring a 3% insurance product with a 5% market return at that time.
Ma Qianlu cautioned that in a low-interest-rate environment, insurance funds cannot continue to maintain the returns of historically high-yielding bonds and will eventually be diluted by low interest rates. Even if the equity market delivers excess returns, it will be very difficult to realize the interest margin promised at the interest rate peak. The Deloitte team also compared domestic companies with international companies, adding four international companies, including AIA, Manulife, Sun Life, and Canada Life, to the analysis sample of new standard reports. Ma Qianlu said that even compared with international giants, leading domestic life insurers' profit levels still rank among the top. In terms of profit composition, overseas companies' investment-side profit contribution is not prominent, and the insurance side is a more important source of profit.
Ma Qianlu inferred that overseas companies do not hope to earn excess interest margin on the investment side. Insurance itself is an industry that manages risk, and stable, long-term development is fundamental, especially when the cycle is unfavorable. Another observation comes from the composition of changes in net assets. Ma Qianlu found that domestic companies' profit and comprehensive income results often differ greatly, while overseas companies show very small differences. Further analysis shows that overseas companies rarely leave factors affecting net assets in other comprehensive income. Taking stock investment as an example, a considerable proportion of equity investments held by leading domestic life insurers are designated for measurement at other comprehensive income, with the purpose of reducing the impact of capital market volatility on the income statement. The cost is that future trading spreads no longer enter the income statement either. The four international companies have almost no such classification, and all stock investments are classified at fair value through profit or loss, or FVTPL.
Ma Qianlu inferred that this may be related to the maturity of the capital market. Because of industry characteristics, overseas life insurers may not be overly concerned about income statement volatility, and the two approaches themselves are hard to judge as right or wrong.
In a declining or low interest rate environment, Ma Qianlu provided several ideas from both the liability side and the asset side. Aging is not only a trend in China; Japan and Germany have had similar experiences. As aging deepens, health insurance and annuity products will gradually become more mainstream categories. The UK pension system shifted from defined benefit plans, or DB, to defined contribution plans, or DC, while the U.S. market transitioned from variable annuities to guaranteed-return products. On the asset side, overseas companies differ from domestic companies in two points. Derivatives are rarely used by domestic life insurers, which basically do not hedge risk and prefer to earn excess returns through equity investment. It is not common to lock in the prices of existing equity assets through derivative instruments. The purpose of derivatives is to avoid market risk, not to seek excess returns. Investment market diversification also differs: overseas companies can maintain diversification of investment risk by investing in markets in different regions, while the vast majority of domestic insurance companies can only allocate assets in the domestic market, with relatively limited choices of asset types and market changes.
From a business development perspective, the handling of existing business and new business differs. Ma Qianlu said that long-cycle existing business sold in the past had relatively high guaranteed interest rates, and some also involved oral promises during sales. Under the background of continuously declining interest rates, the industry is indeed worried about whether these can be covered. A feasible direction is to return to a market perspective and let excessively high return expectations gradually return to reality. The focus of new business is to optimize the product structure of guaranteed interest rates and floating returns. Traditional insurance has a relatively higher guaranteed interest rate, while participating insurance has a relatively lower one. Companies can give policyholders feedback on returns in dividend declarations based on actual operating results. Flexible adjustment can both provide satisfactory returns to policyholders when interest rates rise and avoid excessive rigid cost pressure when interest rates fall. Directions such as disability insurance, long-term health insurance, care-related business, and unit-linked insurance are also worth advancing.
Ma Qianlu finally returned to the products themselves. In the three stages of product design, sales, and review, the investment side and business side need to participate together. Under the old standard, insurance and investment were regarded as two carriages. Under the new standard, the cost of insurance funds is separately presented, and the conditions for refined management are more sufficient than before. Ma Qianlu suggested that when designing products, first ask the investment side how much it can earn in the future, and then determine the product form and return expectations. The two ends cannot be disconnected. The worse the cycle, the more refinement is needed.