Did you know? Chow Tai Fook Life Insurance Company Limited does not have any interest rate risk RCA, as at 30 June 2025.
Pass-through Ratio
"Pass-through Ratio" isn't a formal, strictly defined industry term — we're using it here simply to describe how much of an insurer's losses (such as investment losses) could be absorbed by policyholders rather than by the insurance company itself, for example via reduced discretionary benefits.A simple example: Suppose an insurer loses $100 on its stock investments. If it then reduces policyholders' non-guaranteed benefits by $80, the company's own shareholders are left bearing only $20 of the loss. In this case, the pass-through ratio is 80% — meaning 80% of the loss was passed on to policyholders.For how this ratio is derived, considerations and limitations, please refer to the remarks below.
How the range is derived — The pass-through ratio here is defined as Liability Impact ÷ Asset Impact under the equity stress scenario, where:
Asset Impact is the stress impact on total equity holdings within the EBS. The range reflects two extreme assumptions: at one end, assuming all holdings as developed market listed equities (subject to a 40% + Countercyclical Adjustment stress), and at the other end, assuming all holdings as emerging market listed equities (subject to a 50% + Countercyclical Adjustment stress). The CCA amount is prescribed by the Insurance Authority as of the reporting date.
Liability Impact is derived as Asset Impact - Equity Risk PCA.
This ratio is a high-level indication of "pass-through" ability at the company level, not for any individual fund. In practice, for example, assets backing participating funds are required to be physically segregated and may exhibit a different pass-through ability.
The ratio does not reflect actual bonus decisions, bonus history, investment policy, or bonus/dividend philosophy etc. For these, please refer to the data and documents published by the respective insurers.
The derivation assumes that all PCA is contributed by non-Class C (i.e., non-unit-linked) products, since "Policyholder's account assets in respect of unit-linked products" within the EBS are excluded from the calculation. In reality, however, while insurers generally do not bear investment risk on unit-linked products, these products still contribute to Equity Risk PCA — primarily through the loss of future fee income under equity stress. As a result, the current derivation underestimates the "true" pass-through ratio. This explains why certain companies in the chart show very low, or even significantly negative, pass-through ratios. These are typically insurers with a more significant unit-linked portfolio but relatively limited direct equity investment, and their results are therefore distorted.
Insurers with no equities holdings are not listed.
There are other limitations, such as other types of equity investment that is subject to a different equity stress factor.