The China Banking and Insurance Regulatory Commission issued the "Notice on Strengthening the Supervision of Universal Life Insurance".

Recently, the China Banking and Insurance Regulatory Commission issued a notice on strengthening the supervision of universal life insurance, proposing that, in addition to whole life insurance, universal life insurance and annuity insurance products, other products must not be designed as universal life insurance. The insurance period of universal life insurance must not be less than five years. Insurance companies can extend the actual duration of the policy by reasonably setting surrender charges, partial withdrawal charges, and policy persistency rewards, to further meet the long-term protection needs of consumers. Policy persistency rewards should not be paid earlier than the end of the fifth policy year. Original Text: Notice of the China Banking and Insurance Regulatory Commission on Strengthening the Supervision of Universal Life Insurance All financial regulatory agencies, all life insurance companies: In order to strengthen the supervision of universal life insurance (hereinafter referred to as universal insurance), strictly regulate the operation of universal insurance, guide life insurance to return to its core function of protection, and protect the legitimate rights and interests of insurance consumers, the relevant matters are hereby notified as follows: I. Strengthen product management (1) Universal insurance refers to life insurance that meets the following characteristics at the same time: 1. The product name includes the words "universal life"; 2. It has insurance protection functions, and according to the contract, additional premiums can be added irregularly or the insurance amount can be adjusted; 3. A separate policy account is established, and according to the contract, a portion or all of the policy account value can be withdrawn; 4. The policy account value provides a minimum profit guarantee, and the minimum guaranteed interest rate must not be negative. To strengthen asset-liability management and protect long-term customer interests, insurance companies can set a guarantee period for the minimum guaranteed interest rate of universal insurance, and after the guarantee period, the minimum guaranteed interest rate can be reasonably adjusted. When selling such products, insurance companies should fully disclose risks to customers, and when adjusting the minimum guaranteed interest rate, the reasons for the adjustment should be promptly communicated, and customer service should be provided. If additional premiums are allowed according to the contract, the conditions for additional premiums should be clearly stated in the product terms. (2) Except for whole life insurance, universal life insurance, and annuity insurance products, other products must not be designed as universal insurance. (3) The insurance period of universal insurance must not be less than five years. Insurance companies can extend the actual duration of the policy by reasonably setting surrender charges, partial withdrawal charges, policy persistency rewards, and other product factors, to further meet the long-term protection needs of consumers. The payment of policy persistency rewards should not begin before the end of the fifth policy year. (4) The premium for universal insurance is composed of basic insurance premium and additional insurance premium, with the part exceeding the basic insurance premium being the additional insurance premium. For the same insured person, the sum of the basic insurance premiums of all valid policies of the same universal insurance product sold by an insurance company must not exceed RMB 20,000. For insured persons aged 18 to 60, the death insurance amount specified at the time of policy issuance must not be less than 20 times the basic insurance premium. II. Strengthen account management (5) Insurance companies should establish one or more separate accounts for universal insurance, and the assets of different accounts of universal insurance should be managed separately, providing information on asset value, corresponding policy account value, settlement interest rate, and asset-liability. This will meet the requirements for managing the separate account and settling policy benefits. (6) Insurance companies should establish a system for managing the accounts of universal insurance, clearly defining the mechanism for initiating fund transfers and withdrawals, triggering mechanisms, operating procedures, approval authority for splitting, merging, closing accounts, etc., to ensure the fairness and reasonableness of fund transfers, account adjustments, and account settlements, and protect the legitimate rights of policyholders. (7) Within 6 months of establishing a separate account for universal insurance, insurance companies may transfer start-up funds to the account, which can only be used for initial asset allocation of the account. Start-up funds must be legally sourced from the company's own funds, and the scale of funds should be scientifically reasonable. During the operation of the account, when the account liquidity is sufficient, and the transfer of start-up funds has no significant impact on its asset allocation and stable operation, insurance companies can transfer the start-up funds in cash to the company's own account in one lump sum or in installments, but the cumulative transfer amount must not exceed the sum of the start-up funds and the profits generated. (8) The funds belonging to policyholders of universal insurance should be promptly and fully allocated to the separate account for universal insurance. Insurance companies must not arbitrarily change the account ownership of universal insurance funds, except for splitting, merging, closing accounts, and transferring start-up funds as mentioned above. (9) The separate account for universal insurance can be settled on a monthly, quarterly, or annual basis. Insurance companies should settle policy benefits based on the actual investment income of the account assets, and should not artificially increase account investment income by adjusting the ownership of different assets or increasing asset values. (10) Based on the actual investment status of the separate account for universal insurance, insurance companies should prudently and reasonably determine the settlement interest rate of universal insurance, periodically assess the impact of the settlement interest rate on the asset-liability matching situation of the company, and dynamically adjust the settlement interest rate according to the assessment. The policies managed under the same separate account should use the same settlement interest rate. (11) Insurance companies should establish clear surplus distribution rules for the separate account of universal insurance and use this to establish special reserves. The special reserve must not be negative, and can only be accumulated from the difference between the investment income rate of the separate account of universal insurance and the actual settlement interest rate. The requirements for the use of special reserves are as follows: 1. When the annualized investment income rate for the period is not lower than the minimum guaranteed interest rate, and the balance of the special reserve exceeds 2% of the account value, insurance companies can use the special reserve to make up for the difference between the current settlement interest rate and the annualized investment income rate for the period, but the difference must not exceed 25 basis points. 2. When the annualized investment income rate for the period is not lower than the minimum guaranteed interest rate, but the balance of the special reserve does not exceed 2% of the account value, insurance companies are not allowed to use the special reserve, and the settlement interest rate for universal insurance for the period must not exceed the annual investment income rate. 3. When the annualized investment income rate for the period is lower than the minimum guaranteed interest rate, insurance companies can use the special reserve to make up for the difference between the minimum guaranteed interest rate and the annualized investment income rate for the period, and the settlement interest rate for universal insurance for the period must not exceed the minimum guaranteed interest rate. (12) When the separate account for universal insurance meets the following conditions and the special reserve is insufficient, the settlement interest rate for the period must not exceed the higher of the minimum guaranteed interest rate and the annualized investment income rate for the period: 1. For monthly settlement of the separate account of universal insuranceRisky account, the annualized investment return rate for three consecutive months is lower than the annualized settlement interest rate. 2. For universal insurance accounts settled on a quarterly basis, the annualized investment return rate for the previous quarter was lower than the annualized settlement interest rate for the previous quarter. 3. For universal insurance accounts settled on an annual basis, the investment return rate for the previous year was lower than the settlement interest rate for the previous year. (Thirteen) Insurance companies should regularly review the asset value of individual accounts for universal insurance to ensure it is not lower than the corresponding policy account value. If the asset value of the individual account for universal insurance at the end of the quarter is lower than the corresponding policy account value, the company should transfer funds from its own capital to the individual account within 15 working days to make up the difference. Once the funds are transferred, they cannot be transferred to other accounts. (Fourteen) Insurance companies may cancel relevant accounts according to the universal insurance account management system described in section (Six). The cancellation plan should ensure fair and reasonable arrangements for asset transfer, asset liquidation, and must be approved by the internal decision-making within the company. (Fifteen) If there are funds belonging to policyholders in the individual accounts for universal insurance that are to be cancelled, the insurance company should liquidate all assets in the account before cancellation, inform the policyholders in an appropriate manner, and ensure proper fund settlement. This excludes accounts that are cancelled as a result of merging with other individual accounts for universal insurance. Three, Strengthen Asset-Liability Management (Sixteen) Insurance companies should strengthen the coordination between the asset management department and the liability management department according to the regulatory requirements for asset-liability management, and based on their own business and risk characteristics, enhance the asset-liability management of universal insurance accounts, regularly identify, measure, and monitor asset-liability matching quantitative indicators. For universal insurance accounts with asset-liability mismatch risk, management measures should be taken proactively in compliance with laws and regulations. (Seventeen) Insurance companies should develop scientific and reasonable investment strategies based on the attributes and characteristics of universal insurance accounts, regulate investment behavior, strictly control the proportion of investment in major asset classes, actively manage concentration ratios in single industries, single varieties, and single counterparties, and effectively manage related risk exposure to ensure that it is within their own risk tolerance level. The utilization of funds from universal insurance should comply with the following regulations: 1. The balance of investment in equity of a single unlisted company shall not exceed 20% of the total share capital of the unlisted company; the balance of investment in a single equity investment fund shall not exceed 30% of the actual amount paid by the equity investment fund. 2. The balance of investment in financial products related to a single real estate property shall not exceed 25% of the actual scale of the product. 3. The balance of investment in a single collective fund trust plan shall not exceed 25% of the actual trust scale of the product (excluding AAA-rated). (Eighteen) Insurance companies should adhere to the regulatory requirements for the utilization of insurance funds, strengthen the liquidity management of universal insurance accounts, and reasonably determine the maturity and proportion of assets invested in the account. Specific requirements are as follows: 1. The balance of liquid assets with a remaining term of over one year in government bonds and quasi-government bonds shall not be less than 5% of the account's asset value. 2. The total balance of investment in unlisted equity, real estate assets, and other financial assets shall not exceed 45% of the account's asset value, of which the total balance of assets traded in markets approved by the State Council such as the interbank market, stock exchange market, shall not exceed 40% of the account's asset value; the balance of a single project shall not exceed 5% of the account's asset value, excluding insurance asset management products within the same group. Single projects are assessed based on the principle of penetration. (Nineteen) Insurance companies should strengthen the management of related transactions in the utilization of universal insurance funds in accordance with relevant laws, regulations, and regulatory requirements, improve corporate governance, enhance internal control and risk management, and conduct related transactions following the principles of honesty, fairness, transparency, and clear structure. They shall not conduct fund utilization through methods such as aggregation, multi-layer nesting, channel operations, equity holding, asset holding, mutual major shareholder investments, controlling subsidiaries, etc., in order to evade regulatory requirements for related transactions and harm the interests of policyholders. Four, Strengthen Sales Behavior Management (Twenty) Insurance companies should enhance pre-job training and ongoing education for sales personnel to ensure that they fully and accurately understand universal insurance products. Sales personnel selling universal insurance should meet the following conditions: 1. Have some insurance sales experience and no negative record; 2. Have received necessary specialized training and passed internal specialized tests within the company; 3. Meet the relevant requirements for sales personnel hierarchical management; 4. Other conditions required by the China Banking and Insurance Regulatory Commission. (Twenty-one) Insurance companies selling universal insurance products should reflect the insurance attributes of the products and should not engage in the following behaviors: 1. Undermine the personal insurance protection attributes of universal insurance and only promote products using terms such as "interest" and "expected returns"; 2. Simplify comparisons or confuse universal insurance products with other financial products; 3. Indirectly or implicitly guarantee policy benefits for universal insurance products that exceed the minimum guaranteed interest rate; 4. By adjusting surrender fees, continuing rewards, or other product design elements, or by introducing clauses such as partial withdrawals, survival benefits, reduced coverage, etc., they indirectly shorten the actual duration of the products; 5. Irregular combination sales behaviors of universal insurance products with other insurance products; 6. Other prohibited behaviors stipulated by the China Banking and Insurance Regulatory Commission. Five, Strengthen Supervision and Management (Twenty-two) The China Banking and Insurance Regulatory Commission and various regulatory agencies should strengthen off-site supervision of universal insurance and conduct on-site inspections as necessary. For insurance companies with major defects and problems, the China Banking and Insurance Regulatory Commission or the local regulatory agencies may request them to formulate rectification plans and complete them within a specified period. If serious violations persist without correction, further regulatory measures or administrative penalties may be taken in accordance with relevant laws and regulations. (Twenty-three) If insurance companies violate regulatory requirements resulting in significant losses or major risks in the development, design, sales behavior, account management, asset-liability management, fund utilization, related transactions, etc., of universal insurance products, the China Banking and Insurance Regulatory Commission or local regulatory agencies may take supervisory measures or impose administrative penalties in accordance with the "Insurance Law of the People's Republic of China" and relevant regulations. (Twenty-four) This notice shall be implemented from May 1, 2025. Article Four of the "Universal Insurance Actuarial Regulations" attached to the "Notice of the China Insurance Regulatory Commission on Matters Related to the Reform of Universal Life Insurance Rate Policy" (CIRC Letter [2015] No. 19) applies.The provisions on basic insurance premiums in Articles 5, 8, 9, and 12, as well as Article 7 of the "Notice of the China Insurance Regulatory Commission on Strengthening the Supervision of Life Insurance Products" (CIRC Life Insurance [2016] No. 199), shall be simultaneously repealed.Before the implementation of this notice, if the universal insurance business conducted by insurance companies does not comply with the requirements of this notice, it should be rectified by April 30, 2026, in principle. Officials from the relevant bureaus of the China Banking and Insurance Regulatory Commission responded to questions from journalists regarding the "Notice on Strengthening the Supervision of Universal Life Insurance". Recently, the regulatory commission issued the "Notice on Strengthening the Supervision of Universal Life Insurance" (hereinafter referred to as the "Notice"). Officials from the regulatory commission responded to questions from journalists on related issues. 1. What is the background of the issuance of the "Notice"? In recent years, under strict regulatory constraints, universal life insurance has met the insurance needs of the people, with fewer consumer complaints and effective risk prevention. However, there are still some issues with certain universal life insurance business, such as the need to strengthen protection functions, irregular account operations, and some universal life insurance funds being used too aggressively. In order to rigorously regulate universal life insurance, the regulatory commission issued the "Notice", specifically addressing the main problems existing in universal life insurance through targeted institutional governance to promote the sustained and healthy development of universal life insurance. 2. What is the overall principle of the "Notice"? - Uphold strict supervision: Combine strengthening weaknesses with promoting long-term effects, rigorously regulate the operations of universal life insurance focusing on product management, account management, fund management, sales management, etc., further strengthening regulatory measures to better protect the legitimate rights and interests of insurance consumers. - Focus on problem orientation: Emphasize key issues, strengthen governance from the source. For problems related to the need to strengthen protection functions, the development of short-term products is prohibited, and efforts should be made to further improve the level of protection. Focus on issues such as a few universal life insurance promises of guaranteed returns and aggressive investments, and focus on improving related provisions on account operations and fund utilization. For irregular sales of universal life insurance, a "negative list" of sales of universal life insurance is established. - Implement a distinction between old and new: Adhere to the combination of risk prevention and orderly regulation, prudently and steadily promote the implementation of the system. Taking into account market impact, existing businesses that do not meet the requirements of the "Notice" will be given a one-year transition period to ensure the stable operation of the life insurance market. To prevent incremental risks, new products approved or filed during the transition period must comply with the provisions of the "Notice". 3. What are the main contents of the "Notice"? - Regulate product development: Clarify the minimum guaranteed interest rate provided by universal life insurance, allow insurance companies to adjust the minimum guaranteed interest rate of universal life insurance products under certain conditions, especially during periods of declining interest rates, to effectively prevent interest rate risks. At the same time, appropriately increase the upper limit of the basic insurance premium of universal life insurance, encouraging the development of long-term universal life insurance. - Further enhance the level of risk protection: Guide insurance companies to extend the protection period of universal life insurance, prohibit the development of universal life insurance with a period of less than 5 years (excluding 5 years), and encourage the extension of the actual policy duration through reasonable adjustments to surrender fees, continuous bonuses, and other product design factors. - Strengthen account management: Standardize the entire process from account establishment to cancellation. In the establishment of accounts, focus on standardizing the start-up capital operation. During the account life, companies are required to regularly review the asset-liability status of accounts and timely make up for deficiencies. During account cancellation, insurance companies are required to clarify trigger mechanisms and related requirements further to ensure fairness and reasonableness. At the same time, focus on regulating account settlement. Companies are required to reasonably and prudently determine the settlement interest rate of universal life insurance based on real investment conditions of accounts. Establish a smoothing mechanism for settlement interest rates and strictly regulate the use of special reserves. - Strengthen fund utilization supervision: Strengthen concentration supervision, set strict limits on the proportion of universal life insurance funds invested in single equity investment funds, real estate-related financial products, etc. Strengthen supervision of related transactions and prohibit improper related transactions through multi-layer nesting, conduit business, etc. Strengthen supervision of non-standard investments and set strict limits on the proportion of universal life insurance funds invested in non-standard real estate and financial products. - Strengthen sales management requirements: Require companies to strengthen the classification of sales personnel and the management of product suitability to prevent sales misleading. Establish a "negative list" for sales, list six types of behaviors that insurance companies must not engage in selling universal life insurance, prohibit insurance companies from altering the nature of universal life insurance products by providing indirect or implicit guarantees, or by shortening the actual policy duration through various means. Strengthen requirements for information disclosure by insurance companies, emphasizing on timely informing consumers appropriately about matters related to the minimum guaranteed interest rate adjustment, account cancellation, etc., which are relevant to consumer interests. 4. What impact will the issuance of the "Notice" have on the market? The "Notice" will help further regulate the market order of universal life insurance, promote the sustainable and healthy development of universal life insurance, and better protect the rights and interests of insurance consumers. Specifically, the impact on the market will mainly be reflected in the following aspects: - The level of protection will be further improved. Extending the protection period of universal life insurance to 5 years and above, while encouraging insurance companies to extend the actual policy duration by reasonably adjusting surrender fees, continuous bonuses, and other product design elements, will help further meet the long-term protection needs of consumers. - Risk control will be further strengthened. Allowing for an adjustable minimum guaranteed interest rate will help better control interest rate risk. At the same time, by strengthening the supervision of fund utilization in universal life insurance, requiring insurance companies to strictly control the concentration of fund utilization and related transactions, enhance cash flow matching management, closely monitor related risks, can effectively prevent and control mismatching of asset-liability durations and liquidity risks. - Market order will be further standardized. By setting a sales behavior "negative list" and strengthening supervision, issues such as providing indirect or implicit guarantees for universal life insurance products, confusion between universal life insurance products and other financial products, will be effectively curbed, and the behavior in the universal life insurance market will be more standardized.