Insurance investable assets in Asia ex-Japan have risen every year between 2012 and 2016, to reach $2.9 trillion by end-2016.

Life insurers in Asia are finding ways to invest more efficiently as the try go balance coping with regulatory requirements and getting yield and duration, a report by Cerulli Associates says. 

“Concerns over capital and capital charges are making insurers more careful when allocating to riskier assets such as equities, the report, entitled Insurance Industry 2017: Changing Investment Needs Generate Opportunities, said. 

Taiwanese and South Korean insurers, for example, are experiencing changes to their capital frameworks and, for the latter, accounting regime, the report continued. 

"All these point to a need for asset managers to keep up with insurers' evolving needs. Some managers, particularly those with insurance parents, have asset-liability management and regulatory specialists who can better serve life clients," Chin Chin Quah, an associate director at Cerulli who led the report, said. "However, building true expertise takes time."

The report comes at a time when, as reported here, life insurance remains an important part of the Asian wealth management ecosphere, providing a number of products used by high net worth clients, such as critical illness cover. (See an article here.)

The study found, for example, that in Taiwan revisions to the risk-based capital framework announced in late 2016 are expected to see life companies holding more capital. Most organisations should be able to comply, the report said. Such bodies will be “voracious” in their pursuit of foreign investments to boost yields. 

In South Korea, meanwhile, the implementation of International Financial Reporting Standards, or IFRS 17, by 2021 and the need to bolster capital reserves may see life insurers preserve, rather than deploy, capital, the report said. 

Insurance investable assets in Asia ex-Japan have risen every year between 2012 and 2016, to reach $2.9 trillion by end-2016. 

Cerulli expects most markets under its coverage to post double-digit annualized growth rates over the next five years. General account assets will continue to account for the bulk of investable assets. 

“Even so, insurers' practice of outsourcing to affiliates makes it tough for third-party managers to raise assets from this segment - especially in markets dominated by multinational insurers with large asset management arms, such as Hong Kong and Singapore,” it said. 

In the separate account or investment-linked product (ILP) space, the opportunity is not uniform across Asia because of such factors as demand and insurers' openness to third-party funds. Insurers' willingness to on-board third-party products also varies by market and by company, the report said.