Although Taiwanese and Korean insurance companies are currently the most active in overseas investments among insurers in Asia ex-Japan, it is Chinese insurers that outsource the most assets.
Global research and consulting firm, Cerulli Associates estimates that Chinese insurers outsourced some $228.1 billion in life insurance assets in 2015, up by 38.6 percent over 2014 and nearly double the amount in 2011.
This is one of the key findings in Cerulli's newly released Asian Insurance Industry 2016 report. Though most of these outsourced assets are invested domestically, more assets are expected to flow overseas as Chinese insurers see a growing need for better returns outside their domestic market to help meet their liabilities.
Lower Rates and Competition
China's life insurers have seen their liabilities rise as they tried to compete with providers of popular wealth management products by offering policies with attractive return rates, such as universal life. Total insurance liabilities in the country stood at $1.7 trillion in 2015, up by 44.5 percent from 2013.
Chinese insurers also face a growing concern over the potential impact of lower interest rates. A fall in interest rates will inevitably have an impact on their investment income and will push insurers to deploy assets more efficiently by diversifying their sources of returns, including overseas.
Expansion of Offshore Allocation
With the general lack of overseas investment experience and expertise among Chinese insurers, Cerulli expects many of them to work with foreign managers on offshore allocation.
«There will particularly be opportunity among small and mid-sized players as they follow the lead of large insurers and rely on third parties. Unlike their larger counterparts, most of these players don't have asset management subsidiaries in China or Hong Kong to help them with their investments,» said Manuelita Contreras, (pictured) Associate Director at Cerulli, who led the report.
Supporting this outlook is the increasing number of insurers with regulatory approval to invest overseas. Nine life and non-life companies received the green light to invest overseas in 2015 through the external manager route, up from only four in 2014. As of July 2016, 15 insurers have the approval to invest overseas through this route.
