Wen Liu Sijia
Perpetual bonds are becoming the new capital ammunition depot for headline insurers. Since the beginning of 2025, the scale of insurers’ issuance of perpetual bonds has reached 23.7 billion yuan, hitting a historical peak in the same period.
As an important means to promote medium- and long-term capital into the market, the reform of long-term investment of insurance funds has been the focus of regulatory attention.
On March 5, Li Yunze, director of the General Administration of Financial Supervision, put forward in the first ministerial channel of the Third Session of the 14th National People’s Congress that the General Administration of Financial Supervision is actively and steadily guiding banks and insurance funds to invest in the early, small and long-term as well as hard science and technology enterprises. This statement not only highlights the great importance that regulators attach to the use of insurance funds, but also signals that insurance funds will play a more important role in the future.
Behind the wave of issuance of perpetual bonds by insurance companies is the urgent desire of insurance companies for capital supplementation, and also the choice of insurance companies to accurately capture the trend of interest rate changes and optimize their own capital structure, and even more so, insurance companies have provided a new source of funds.
01 Perpetual bonds
01
Perpetual Bond Rampage
For insurance companies, debt issuance has always been an important means to replenish blood, especially when facing capitalization pressure or business expansion needs.
Compared with other long-term debt instruments, perpetual bonds usually have lower interest rates, making them a low-cost financing option. In addition, it has the dual attributes of debt and equity, and the interest payment of perpetual bonds can be deferred under certain conditions, making the issuance of perpetual bonds a natural choice for insurers in times of cash flow constraints.
Since August 2022, when the Circular on Matters Relating to the Issuance of Unconditional Capital Bonds by Insurance Companies (hereinafter referred to as the Circular) allowed qualified insurance companies to issue unconditional capital bonds, perpetual bonds have gradually become a favored capital replenishment method for insurance companies.
According to the statistics, the scale of issuance of perpetual bonds by insurance companies has been rising steadily. in 2023, the total amount of perpetual bonds issued amounted to 35.77 billion yuan, and in 2024, the total amount of perpetual bonds issued amounted to 35.9 billion yuan.
In 2025, just over two months after the start of the year, the scale of perpetual bonds issued by the insurance industry reached 23.7 billion yuan, hitting a historical peak in the same period. See the chart below for specific values
In addition to the above issued bonds, there are tens of billions of bonds to be issued. Recently, NIC also announced that it expects to issue domestic unfixed maturity capital bonds with an amount of not more than 10 billion yuan including 10 billion yuan.
However, it is worth noting that, in terms of the main bodies of the institutions that have issued perpetual bonds, most of them are concentrated in the head insurers with AAA credit ratings.
In addition, the notice also clearly stipulates that the balance of unfixed maturity capital bonds issued by insurance companies shall not exceed 30% of the core capital The issuance of unfixed maturity capital bonds shall not be redeemed if the solvency ratio does not meet the standard after redemption If the solvency ratio does not meet the standard after the payment of interest, the obligation to pay interest for the current period shall be canceled.
In this regard, industry insiders said that the insurance company perpetual debt is categorized as an equity instrument, the investor group will be subject to certain restrictions, the difficulty of issuance and issuance costs have increased compared with the ordinary capital supplemental bonds, for some small and medium-sized insurance companies, it may be difficult to meet the corresponding conditions, so the main body of the insurance company’s perpetual debt issuance in the early period of large-scale high-quality insurers.
02 Multi-factor Driving
02
Multi-factor Driver
As a matter of fact, behind the wave of perpetual bond issuance is also a collective breakout of insurers in the context of regulatory upgrades.
In recent years, insurance regulatory policies have been upgraded, and under the new requirements of Solvency II, the core solvency ratio of insurance companies is generally under pressure, and it is necessary to seek effective ways to replenish capital.
The above-mentioned bond-issuing insurers have mentioned that the use of funds raised from perpetual bonds is to supplement the issuer’s core Tier 2 capital and improve the issuer’s solvency.
In addition, according to regulatory requirements, the transition period of the second phase of the Solvency II project has been extended to the end of 2025, and insurers need to complete the capital structure adjustment within the year. Therefore, industry insiders predict that the scale of debt issuance by insurers in 2025 may continue to expand.
An insurance company actuary said that the company issued perpetual bonds can get a large amount of money at once, reduce the repayment pressure of long-term financing, solve the liquidity problem, and also improve the risk resistance, which is an effective way to replenish blood.
Yuan Shuai, executive vice president of the Institute for the Revitalization of Agriculture, Culture and Tourism Industry, said that in addition to regulatory motivations, the market environment provides favorable conditions for insurance companies to issue perpetual bonds, and the downward trend of interest rates has given rise to a new pattern of financing, and the current interest rate level provides a favorable time for insurance companies to issue perpetual bonds.
Compared with the interest rate level in 2023, which is generally over 3, the interest rate of bonds issued in 2025 shows an overall downward trend, which is located in the range of 2 20 to 2 48. The overall decline in bond interest rates is a positive signal for debt issuers. This means that insurance companies can issue perpetual bonds at a relatively low cost and can raise funds at a lower cost, which helps to reduce financing costs and improve the efficiency of capital utilization.
However, Yuan Shuai also reminded that when issuing perpetual bonds, insurance companies need to fully consider their own financial situation, business development needs and market interest rate trends and other factors to reasonably determine the scale of issuance and timing of issuance, so as to ensure the safety and effectiveness of perpetual bond issuance.
03 New Ammunition for Insurers
03
New Ammunition for Insurers
Insurers are rushing into perpetual bonds, in addition to reducing the cost of financing, the core solvency of the reinforcement will also help insurers to better layout of the capital market.
The Circular on Matters Relating to Optimizing the Supervision of Equity Asset Allocation of Insurance Companies stipulates that, based on the solvency ratio, asset liability management capability and risk profile of insurance companies, the ratio of equity asset allocation shall be defined in seven grades, with the maximum ratio accounting for 45% of the total assets as of the end of the previous quarter.
In practice, according to the statistics of the financial staff of insurance companies, there is a certain positive correlation between the solvency adequacy ratio and the proportion of equity asset allocation, and for every 50 percentage points increase in the solvency adequacy ratio, the proportion of equity asset allocation can be increased by about 2 to 3 percentage points.
This means that the issuance of perpetual debt financing provides more space and flexibility for insurers to invest in the equity market.
Industry insiders point out that the issuance of perpetual bonds by insurance companies, in addition to helping their own capital supplementation, can also respond to the call of the regulatory authorities to actively promote the entry of insurance capital into the market, and more insurance capital flow to the real economy and encode the hard science and technology track.
At the same time, the long-term nature of perpetual bonds is a natural fit with the long-term demand for insurers to enter the market. Insurers are often more suitable for long-term investment due to the long-term and stability of their funding sources. As a debt instrument with no fixed maturity or very long maturity, the repayment period of perpetual bonds matches the investment cycle of insurers, thus effectively avoiding the risk of maturity mismatch. This fit allows insurers to achieve a balance between risk and return.
On March 5, the regulator issued a notice on further expanding the pilot of equity investment in financial asset investment companies, showing support for insurance funds to participate in the pilot of equity investment in financial asset investment companies.
In this regard, industry insiders pointed out that, with the support of further optimization and improvement of the pilot policy, through the issuance of debt, insurance companies may be given priority to obtain innovative investment pilot qualification opportunities if they meet the solvency requirements.
In addition to serving the real economy and promoting the insurance capital into the market, insurance companies issued perpetual bonds also enriched the product system of the financial market, increasing the supply of the financial market, providing more investment options for market investors.
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