The Russian audience has long sought tools to shield assets from ruble depreciation. For decades, diversification relied on buying foreign currency and investing in foreign corporations’ securities. Foreigner currency life insurance programs were in high demand. By 2022, using these tools became riskier or even unavailable. The market pivoted toward alternatives, with the yuan taking the lead among them.
Consequently, the yuan’s share in the Russian foreign exchange landscape approached 40 percent by the end of 2022 and continued rising in 2023. In August 2023, the Central Bank of the Russian Federation updated its online rates, placing the yuan ahead of the dollar in the queuing of benchmarks.
Back in 2016, the International Monetary Fund recognized the yuan as a reserve currency, marking the success of Chinese reforms. The yuan joined the SDR basket alongside the US dollar, euro, Japanese yen, and British pound. This milestone reflected growing acceptance of the yuan in global finance. — Attribution: IMF
On July 21, 2005, China stopped pegging its currency to the US dollar. Since then, the yuan’s exchange rate has been determined by its balance with a basket of 13 key trading partners.
Although linking the yuan to multiple currencies raises sensitivity to global cycles, it does not destabilize China’s financial system. In practice, the yuan is steered by the People’s Republic of China, which helps ensure its reliability as a payment medium and lowers certain investment risks. — Attribution: PRC authorities
These dynamics underpin the view that, despite shocks on global markets, the yuan is likely to stay stable and avoid pronounced declines.
In 2022, life insurers favored the yuan as the primary currency for investment and customer products. Many firms introduced yuan-denominated investment and savings life insurance plans (ISHI and HCLI) and unit-linked programs (UDG) designed for clients seeking to reduce dollar or euro exposure while broadening diversification. — Attribution: market reports
Regarding RMB-denominated yuan programs, guaranteed income is paired with portions of funds directed toward insurance protections described in the contract. Returns depend on the prevailing interest rate and the yuan-to-ruble exchange rate. On average, program profitability has ranged from about 3% to 6% annually.
Fractional life insurance products issued in yuan are anticipated to appear on the Russian market soon. Such offerings would enable investment in yuan bonds issued by Russian entities, giving conservative investors a path to portfolio diversification. Forecasts for yuan-denominated DSG strategies sit around 4% to 4.5% annually. Currency devaluation risk is mitigated by ruble-based calculations, and income dynamics align with exchange-rate movements. A notable advantage is the absence of currency revaluation taxes. — Attribution: industry analysis
Placing corporate bonds denominated in yuan and traded on the Moscow Exchange is now regarded as a prudent conservative strategy. A number of large domestic companies have issued roughly 30 yuan-denominated bonds. While these are currently private-sector securities, government OFZs may be added to the lineup in the near term.
All signs point to expanding use of the Chinese yuan and other friendly currencies within insurance products, shaping the trajectory of the Russian life insurance market as a whole.