China Taibao Su Gang: Traditional asset allocation strategies face huge challenges, insurance asset and liability management must start with "products" as the focus.

Su Gang, Vice President, Chief Investment Officer, and Chief Financial Officer of PICC, delivered a keynote speech stating that traditional allocation strategies face significant challenges in a low interest rate environment. He emphasized the importance of returning to asset-liability management and adhering to the "three principles and three matches" to promote asset-liability synergy, establish a product-centric asset-liability management mechanism, and navigate through interest rate cycles. Su Gang pointed out that the nature of insurance funds determines the need for long-term matching. About 90% of insurance assets come from policy liabilities, which have a long-term duration, naturally requiring long-term management on the fund side. Policy liabilities have cash flow rigidity and high cost stickiness. If asset returns decline in the long term, it will erode capital and increase solvency volatility. The core of asset-liability management is to allocate long-term funds to assets that can withstand interest rate, credit, and liquidity shocks, locking in a safety cushion to ensure financial goals, customer protection, and regulatory bottom lines are not breached. In a low interest rate environment, traditional allocation strategies face pressure on both ends and reinvestment risks persist. It is necessary to find a long-term logic that can span cycles. Insurance fund allocation should return to the three major principles of safety, profitability, and liquidity of asset-liability management, and adhere to cost-revenue matching, term structure matching, and cash flow matching. Furthermore, advancing asset-liability synergy and establishing a product-centric asset-liability management mechanism are important. Su Gang emphasized the need for the asset side to aim to span cycles and continuously optimize asset allocation. On the liability side, efforts should focus on reducing costs, improving structure, and increasing flexibility by actively lowering interest rates on new policies, lowering rigid costs, optimizing source of funds structure to mitigate potential risks from declining interest rates, using a "low guarantee + high floating" design to guide customers to accept income fluctuations, and utilizing technology to achieve precise risk control and operational efficiency to enhance anti-cyclical resilience.