Lower debt costs! 1.25% fixed interest rate dividend insurance launched, with some insurance companies gearing up for universal life insurance

Source: Securities Times Network Author: Deng Xiongying

Recently, joint venture life insurance company China-UK Life launched a dividend product, Fu Man Jia C (Enjoyment Version), with a guaranteed interest rate of 1.25%. This is a 50 basis point reduction from the current market mainstream dividend insurance guaranteed rate of 1.75%, attracting widespread market attention.

Industry analysts believe that the new interest rate benchmark will help push insurance companies away from price wars and steer competition back to core areas such as investment capability and service quality.

Currently, life insurance product strategies are further differentiating. An industry executive told reporters that considering the overall cost of dividend insurance is not low, the company plans to reduce the scale of dividend insurance to within 50% this year, while actively developing universal life insurance.

The insurance companies’ proactive release of dividend products with lower guaranteed rates and focus on universal life insurance is in the context of China entering a downward interest rate cycle in recent years. Currently, the yield on 10-year government bonds has fallen below 1.80%.

The decline in the interest rate benchmark has put continuous pressure on insurance companies’ investment returns and increased rigid payment obligations on the liability side. To address the risk of interest spread loss, under regulatory guidance, the liability costs of Chinese life insurance products have gradually decreased, and a dynamic adjustment mechanism for guaranteed interest rates was established in 2025.

According to the “Notice on Establishing a Dynamic Adjustment Mechanism Linking Guaranteed Interest Rates with Market Rates” issued by the China Banking and Insurance Regulatory Commission in January 2025, the maximum guaranteed interest rate is set as a multiple of 0.25%. When the maximum guaranteed rate of regular life insurance products on sale exceeds the research value by 25 basis points for two consecutive quarters, the maximum guaranteed rate for new products should be promptly lowered, and a smooth transition for old and new products should be ensured within two months.

In recent years, the upper limit of the guaranteed interest rate for regular life insurance products in China has fallen from 4.025% to 2.0%, the upper limit for dividend insurance products from 3.0% to 1.75%, and the guaranteed rate for universal life insurance products has dropped to 1.0%.

As the guaranteed interest rate for life insurance products declines, mainstream products are shifting from traditional fixed-rate products to floating return products represented by dividend insurance. Dividend insurance, which combines “guaranteed returns + floating returns,” has become a common choice for life insurers’ product transformation.

Currently, with the yield on 10-year government bonds returning below 1.8%, the maximum guaranteed rate for regular life insurance products once again becomes inverted with market rates, further narrowing the space for investment adjustments in dividend insurance.

Industry insiders believe that the floating design of dividend insurance allows for more flexible investment strategies, potentially bringing better returns to customers. However, if the liability cost of the guaranteed return part remains high, investment decisions will be constrained.

In fact, this is not the first time insurance companies have proactively lowered product guaranteed rates. In mid-2022, Tongfang Global Life was the first to launch two dividend insurance products with a guaranteed rate lowered by 50 basis points from the industry cap of 2% to 1.5%.

Tongfang Global Life’s Vice General Manager Tong Boning explained to China Securities Journal that the life insurance industry is a long-term business that requires a cyclical perspective in planning to achieve a win-win for both the company and customers. The company’s proactive response aims to balance risk protection, enhance investment flexibility, and improve long-term investment returns, which is beneficial for maintaining customers’ long-term interests.

Currently, the more significant significance of the 1.25% guaranteed rate dividend insurance product lies in exploring new product space.

For China-UK Life, launching the 1.25% guaranteed rate dividend insurance product is a pioneering effort to explore a “growth-oriented” dividend strategy. By constructing a multi-layered dividend system that covers different risk preferences, it helps form a gradient of guaranteed dividend rates, precisely matching customer needs.

Analysis by China Securities Non-Banking Financials suggests that the downward adjustment of this product’s interest rate benchmark results from the combined effects of macroeconomic environment, regulatory mechanisms, and endogenous industry demand. Considering the impact on insurers’ assets and liabilities, a 50 basis point reduction in guaranteed rates on the liability side directly lowers rigid liability costs, significantly easing the risk of interest spread loss. The reduction in guaranteed costs on the asset side also opens space for insurers to allocate more equity assets to seek excess returns. In the future, the returns of dividend insurance will more accurately reflect insurers’ investment management capabilities across cycles.

In the long term, the 1.25% guaranteed rate dividend insurance product can more effectively hedge against interest spread loss and provides an observational window for industry-wide product rate reductions.

On January 20, 2026, the China Insurance Industry Association released a research value of 1.89% for the guaranteed rate of ordinary life insurance products. The condition for triggering a change—when the maximum guaranteed rate exceeds the research value by 25 basis points for two consecutive quarters—was not met.

In the fourth quarter of last year, a life insurance company’s executive predicted, based on the 10-year government bond yield of 1.8870% as of September 30, 2025, that the future research value of guaranteed rates would be between 1.79% and 2.02% by July 2026, indicating no imminent trigger for a guaranteed rate adjustment.

Overall, the shift from insurance companies competing at all costs with high interest rates and rapid growth to proactively issuing life insurance products with guaranteed rates below industry levels reflects a strategic response to complex external environments, active cross-cycle management, and the construction of multi-layered dividend systems—new value choices for the industry.