China's push to expand direct and equity financing is expected to draw further insurance funds into the stock market, with industry experts saying insurers may continue increasing their exposure to equities in 2026.

The country will deepen comprehensive investment and financing reforms in the capital market, improve market entry mechanisms for medium — and long-term capital, refine investor protection schemes and broaden exit channels for private equity funds and venture capital funds, according to a government work report submitted earlier this month to the country's top legislature for deliberation.

Data from the National Financial Regulatory Administration show that by the end of 2025, the balance of funds in use in China's insurance industry had reached 38.48 trillion yuan ($5.57 trillion), up 15.7 percent from the end of 2024.

Of this total, the combined balance of two core equity assets — stocks and securities investment funds — held by property and life insurers amounted to 5.7 trillion yuan, a sharp increase of 1.6 trillion yuan from the end of 2024. The 5.7 trillion yuan accounted for 15.38 percent of property and life insurers' total balance of funds in use, a historically high level.

Industry experts believe insurers' appetite for increasing exposure to equity assets may continue in 2026. A recent survey released by the Banking and Insurance Asset Management Association of China found that stocks and securities investment funds are the most favored domestic investment assets among insurance institutions for 2026. More than 60 percent of insurers said they intend to moderately or slightly increase their stock investments, while about 30 percent indicated their stock positions will remain largely unchanged.

The survey collected responses from 127 insurance institutions, including 36 insurance asset management firms and 91 insurance companies.

The results show that most insurers hold a relatively optimistic view of China's A-share market for 2026. Insurance institutions are bullish on sectors such as electronics, nonferrous metals, power equipment, computers, telecommunications, pharmaceuticals and biotechnology, and basic chemicals. They are also closely watching investment themes, including chips and semiconductors, national defense and military industries, AI computing power, robotics, energy metals, commercial aerospace, pharmaceuticals and innovative drugs, as well as companies expanding overseas and pursuing globalization strategies.

Respondents believe corporate earnings recovery and liquidity conditions will be the main factors shaping the A-share market.

Hong Kong stocks are the most favored overseas investment target for insurers in 2026. According to the survey, about half of insurance asset management companies plan to slightly increase their allocation to Hong Kong equities, while around 40 percent of insurance companies intend to maintain their current allocation.

Kong Xiang, an analyst at Guosen Securities, said that amid declining interest rates, insurers are actively reducing allocations to low-yield assets and shifting funds toward equities and the bond market.

Looking at 2026, China Merchants Securities said that given strong premium growth on the liability side and positive expectations for China's capital markets, the balance of funds under management by insurance companies is likely to maintain double-digit growth. The share of equity assets in insurers' portfolios is expected to continue rising, with the growth of stock investments projected to remain at around the trillion-yuan level.

Ge Yuxiang, an analyst at Zhongtai Securities, estimated that under a neutral scenario, incremental funds flowing into equity funds from insurers in 2026 could reach about 713.3 billion yuan for the full year.

China recently released guidelines to accelerate the high-quality development of technology insurance, aiming to build a support mechanism better aligned with the needs of scientific and technological innovation.

China will seek to better leverage the long-term and patient capital characteristics of insurance funds, encouraging insurers to provide targeted support to companies undertaking major national science and technology projects. The guidelines also call for strengthening investment in emerging industries as well as industries of the future, while encouraging insurance institutions — under market-based and law-based principles — to step up financial support for venture capital firms focused on frontier technology sectors.

jiangxueqing@chinadaily.com.cn