China will pilot a reverse mortgage scheme in four cities — Beijing, Shanghai, Guangzhou and Wuhan — from July 1, National Business Daily reported Tuesday, citing the China Insurance Regulatory Commission.
Reverse mortgages let older homeowners use home equity as collateral for a pension from insurers.
The scheme will be tested for two years and come under commercial insurance. Participation will be voluntary and the scheme will supplement retiree pensions, it said.
Under the guidelines, policyholders have to be at least 60 years old and own their property independently. Insurers will have to have at least five years of operations and 2 billion yuan (US$325.2 million) in registered capital. Their solvency adequacy ratio must be no lower than 120 percent over the past year and the latest quarter, the paper said.
Insurers have to take a “prudent” approach to the scheme, factoring in the risk of falling property prices and policyholder lifespan. No insurance companies have submitted products for commission approval so far, according to the report.
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