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Non-par vs Par
What it is
The two traditional savings structures. Participating policies share in the insurer's surplus through non-guaranteed bonuses, so investment risk is shared with the policyholder. Non-participating policies promise a fixed guaranteed return, leaving the insurer to bear reinvestment and interest-rate risk
Mix between them is the single largest driver of VNB margin, and shifts with rate cycles, product regulation and customer preference
Impact on industries
- Non-par carries the highest margins in the savings range and sells well when customers want certainty, which is why insurers pushed the mix that way after FY24
- Par products transfer investment risk to policyholders and are more resilient in volatile rate environments, so a balanced mix stabilises earnings
- Non-par guarantees create genuine ALM exposure - the insurer must find long-duration assets to match a promise made decades out, and falling rates squeeze the spread
- It is also the segment surrender value norms hit hardest, so insurers with high non-par savings share had to re-engineer products and lean on riders instead