The real estate crisis has now spread in a chain reaction to the insurance industry

On December 1, Vanke tentatively confirmed a preliminary plan to extend the maturity of 2 billion yuan in domestic bonds; on the same day, a vice president of PICC Group was reportedly missing.

This vice president was in charge of property insurance. Let’s start with a quick explainer: insurance companies have two main lines of business—life insurance and property insurance.

Life insurance has been shrinking in recent years, so property insurance has naturally become the main battleground for business growth among insurance companies.

Property insurance is essentially you giving your money to an insurance company, which promises an annualized return/dividend, say 3-4%, and then invests your money. The investment returns, after deducting the dividends, are their profits.

Insurance companies love to invest in government bonds, CT bonds, bank stocks, and even commercial real estate like office buildings—after all, these seem “stable.”

But among these, only government bonds are guaranteed not to default. CT bonds are a gamble, bank stocks can’t perform well every year, and commercial real estate is even riskier.

The worst part is that insurance companies’ financial reports only have to comply with accounting standards, not social ethics. From the reports, all you see is how great the returns from bank stocks were this year.

They say nothing about the default risks of CT bonds or the massive devaluation of commercial real estate. As long as there’s no actual default and no impairment recorded, there’s no devaluation.

There’s a kind of evil called “selective truth.” You can’t expect those selling property insurance to tell you that property insurance carries risks 🤣