China’s ageing population creates growth opportunities for commercial pension saving products – research

 

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China’s ageing population is increasing the burden of elderly support on individuals and the government, but it creates growth opportunities for commercial pension savings products, which is expected to help improve the liquidity position of mainland life insurers, said Moody’s in a note.

Moody’s expected the Chinese government to implement policies and mechanisms to promote the growth of commercial pension savings products and diversify the sources of retirement income, thereby reducing the pressure on public and corporate pension schemes. 

China’s savings rate is among the highest in major economies, so it’s expected that savings could be easily converted into pension-related products, which, with longer premium payment periods and higher renewal rates, will improve the liquidity position of insurers, it said.

Moody’s is more favourable to insurers with good investment records and coverage of the middle class in major cities, which are expected to be in a better position to expand their business, however, as the supply of long-term fixed-income assets is still limited in China, the growth of long-term insurance products will further lengthen the duration of the insurer’s liabilities, which will expose the insurer to higher reinvestment risk.