CHINA Law and Practice Contributed by: Elsie Shi, George Yu, Eleanor Gu and Zach Xu, Jincheng Tongda & Neal Law Firm
A key focus is cracking down on the practice of pay- ing excessive “technical service fees” to platforms as a way to disguise illegal commission payments. The regulatory requirement is that fees paid to tech plat- forms correspond strictly to the value of the technical services provided, ensuring the “separation of fees and commissions” to maintain fair market competi- tion. 11. Emerging Risks and New Products 11.1 Emerging Risks Affecting the Insurance Market The Chinese insurance market is currently navigating a transition period characterised by the convergence of macroeconomic shifts and technological disrup- tions. The most prominent risks and the correspond- ing regulatory responses are as follows. Asset-Liability Matching Risk (Interest Rate Risk) The prolonged low-interest-rate environment has intensified the risk of “negative spread” for life insur- ers, where investment returns struggle to cover the rigid guaranteed rates of legacy policies. The NFRA has taken decisive action by lowering the cap on the pricing interest rate for traditional life insurance prod- ucts, and mandating the “integration of reporting and conduct” to strictly control expense loading and pre- vent aggressive pricing wars. New Energy and Technological Risks The rapid dominance of new energy vehicles and the expansion of energy storage systems have introduced high numbers of claims due to battery thermal runa- way and costly integrated repairs. Concurrently, the rise of AI brings algorithmic liability and data privacy risks. The NFRA issued the Implementation Plan for the High-Quality Development of Green Finance in the Banking and Insurance Industries, explicitly encour- aging insurers to research differential pricing mecha- nisms for new energy vehicles and to strengthen risk management standards for emerging technologies. Extreme Weather and Climate Change Risks The frequency of floods and typhoons affecting inland Chinese cities has exposed a significant protection gap and challenged historical catastrophe modelling.
The NFRA has emphasised the construction of a multi- layered disaster risk protection system. This includes the Opinions of the State Council on Strengthening Regulation, Preventing Risks and Promoting High- Quality Development of the Insurance Industry, which urges the industry to expand coverage breadth and explore market-based risk transfer mechanisms. 11.2 New Products or Alternative Solutions To address the emerging risks, the market has devel- oped the following targeted products and solutions. Asset-Liability Matching Risk (Interest Rate Risk) In response to the lowering of guaranteed interest rates, insurers are aggressively shifting their prod- uct mix from fixed-income traditional life insurance to floating-return products. Dividend-participating insurance and universal life insurance have become the mainstream new products. These allow insurers to share investment risks with policyholders, thereby reducing the pressure of rigid long-term liability. Addi- tionally, commercial pension annuities with long lock- in periods are being promoted to align asset duration with liability duration. New Energy and Technological Risks The industry has fully transitioned to the Exclusive Commercial Insurance Clauses for New Energy Vehi- cles. Unlike traditional auto policies, these extend to the “Three Electrics” (battery, motor, electric control) and specific scenarios such as charging risks. Further- more, to address energy storage risks, insurers have developed specialised energy storage system safety liability insurance, which often includes IoT-based risk monitoring services as part of the package to prevent thermal runaway incidents. Extreme Weather and Climate Change Risks To solve the liquidity issues in traditional claims adjust- ment during disasters, parametric (index) insurance is rapidly expanding beyond agriculture to cover urban flooding and power grid interruptions. Payouts are triggered immediately when meteorological data hits a threshold. Additionally, utilising the Hong Kong market to issue catastrophe bonds has become a key alterna- tive solution for Chinese insurers to transfer domestic typhoon and earthquake risks to the global capital market.
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