The China Insurance Regulatory Commission said on Friday that the ceiling on assumed interest rates for traditional life policies will be abolished on Monday as part of the process of liberalizing and internationalizing pricing in the insurance market.

The current assumed interest rate ceiling is 2.5 percent, a level that was imposed in 1999 to limit competition.

An assumed interest rate is the minimum rate that must be earned on investments in the policyholder's cash-value account to cover the insurance company's costs and expected profit margin.

The CIRC said assumed interest rates of traditional life policies will now be decided by insurers, who must strengthen their management of legal reserve funds, solvency and risks.

Analysts said the profit margins of insurers might shrink amid fiercer competition after the new rule takes effect.