Taiwan: Life insurers look at US municipal bonds
Source: Asia Insurance Review | Feb 2019
Taiwan’s insurance companies are paying attention to the US municipal bond market, following an announcement in November by Taiwanese regulators that domestic life insurers could buy US municipal revenue bonds, reported Bloomberg.
Previously, the insurers could only invest in general-obligation debt.
“The broader investment guidelines pave the way for Taiwanese insurance accounts to play a more active role in the US municipal market,” said RBC Capital Markets director of municipal underwriting Glenn McGowan. Their participation will depend on market conditions, comparative interest rates, and currency hedging costs, he said.
Revenue bonds from active issuers, and those that are frequently traded and with ratings in the A category or higher, are likely to be the focus of Taiwanese insurers, Mr McGowan said.
Specifically, they may prefer taxable munis sold by essential service providers such as utilities, non-profit hospitals and higher-education institutions, said DWS Group managing director, municipal bond portfolio manager Matt Caggiano.
At the moment, though, the yield is unattractive. Mr Caggiano said, “A lot of the companies are saying the hedging costs have increased.” Their target returns, “Just aren’t available for the most part,” he said. A