In­sur­ers to go big on in­vest­ments in over­seas mar­kets

Survey finds many rea­sons be­hind com­pa­nies’ plans to di­ver­sify as­sets

China Daily (Hong Kong) - - BUSINESS - By WU YIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

Like their global peers, China’s in­sur­ers are look­ing at over­seas mar­kets to di­ver­sify their in­vest­ments, hedge risks, and gain sta­ble and steady in­come ...” Phillip Benoit, head of the APAC mar­ket, BNP Paribas

China’s in­sur­ers are keen to step up over­seas in­vest­ments in the next five years, a survey has found.

BNP Paribas sur­veyed 12 lead­ing do­mes­tic in­sur­ers and found they are ea­ger to di­ver­sify as­sets and hedge risks, and are look­ing at op­por­tu­ni­ties be­yond pop­u­lar op­tions like real es­tate, listed stocks and pri­vate eq­uity.

Among the sur­veyed are joint ven­tures and se­nior ex­ec­u­tives. The re­spon­dents said in­sur­ers’ over­seas in­vest­ments are still at an early stage. On av­er­age, only 2 per­cent of their in­vestable cap­i­tal is in­vested over­seas.

China’s in­sur­ers are ex­pected to have as­sets in ex­cess of 12 tril­lion yuan ($1.74 tril­lion) by this yearend, according to data of the China In­sur­ance Reg­u­la­tory Com­mis­sion.

It is es­ti­mated that China’s in­sur­ers will have a to­tal as­set bal­ance of around 20 tril­lion yuan by 2020.

So, in­sur­ers will likely in­vest some $100 bil­lion in over­seas mar­kets by 2020, or 2.7 times that by 2015-end.

China’s in­sur­ance reg­u­la­tor has stip­u­lated that do­mes­tic in­sur­ers’ over­seas in­vest­ments shall not ex­ceed 15 per­cent of their to­tal as­set bal­ance by lat­est year-end.

The cur­rent level (around 2 per­cent) is far be­low this level, sug­gest­ing there is great po­ten­tial for growth, the re­search re­port said.

About 55 per­cent of re­spon­dents said they would like to in­crease over­seas in­vest­ments to some­where be­tween 5 per­cent and 10 per­cent by 2020. That would sig­nify sig­nif­i­cant growth, the re­search re­port said.

Some 45 per­cent of re­spon- dents said they would like to in­crease over­seas in­vest­ments to some­where be­low 4 per­cent, which re­flects a pru­dent sen­ti­ment.

Rea­sons abound as to why in­sur­ers are look­ing at over­seas mar­kets: as­set di­ver­si­fi­ca­tion, hedg­ing of risks, higher re­turns, a bal­anced debt ra­tio and a larger global foot­print.

“Over­seas in­vest­ments will help us to ob­tain as­sets we don’t have in the do­mes­tic mar­ket. For ex­am­ple, as­sets of ground­break­ing tech­nolo­gies, and as­sets in the sports in­dus­try,” the re­search note quoted a se­nior ex­ec­u­tive re­spon­dent from Shang­hai-based ICBCAXA Life In­sur­ance Com­pany as say­ing.

Phillip Benoit, head of the APAC mar­ket, BNP Paribas, said: “Like their global peers, China’s in­sur­ers are look­ing at over­seas mar­kets to di­ver­sify their in­vest­ments, hedge risks, and gain sta­ble and steady in­come. But con­sid­er­ing the un­cer­tainty in global mar­kets, cur­rency risks and many other fac­tors, China’s in­sur­ers are both as­pir­ing and pru­dent.”

He said while the United States is still the most pop­u­lar in­vest­ment des­ti­na­tion, Europe has a lot of good op­por­tu­ni­ties to of­fer with a num­ber of un­der­val­ued as­sets.

China’s in­sur­ers need to build up their in-house ca­pac­ity to al­lo­cate these op­por­tu­ni­ties. Also, they should seek pro­fes­sional help to pre­vent reg­u­la­tory risks and get lo­cal know-how be­fore en­ter­ing an over­seas mar­ket, Benoit said.

A sep­a­rate re­search note from Z-Ben Ad­vi­sors, an as­set management re­search and con­sul­tancy ser­vices provider, said the China Risk-Ori­ented Sol­vency Sys­tem, which was im­ple­mented at the be­gin­ning of this year, en­cour­ages in­sur­ers to im­prove their risk management, giv­ing them one more rea­son to look for good as­sets in global mar­kets.

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