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South Korea: Life insurers seen to invest more in foreign assets

Source: Asia Insurance Review | May 2018

Asia South Korea Investment Management Life & Health

Korean life insurers are expected increasingly to divest themselves from some of their longer-dated domestic bond holdings in favour of higher-yielding foreign assets, reports Bloomberg citing Mr Karan Talwar, Hong Kong-based investment specialist for emerging-market debt at BNP Paribas Asset Management. 
   Changing regulations are making it easier for them to go abroad, he said. Among the changes:
  • Starting last June, the Financial Supervisory Service (FSS) has let insurers count the duration of foreign holdings against their liabilities without costly currency hedging;
  • The maximum duration allowed for insurers was extended by the FSS to 25 years in December, from 20 years previously, and will be stretched to 30 years at the end of 2018;
  • IFRS 9 will make it tougher to hold domestic structured products and enhance the relative attraction of long-duration foreign bonds;
  • Legislation is pending to remove a 30% foreign cap on insurers’ assets; and
  • Korean life insurers’ overseas assets could more than double by 2022, to $280bn, with annual outflows of $40bn a year. A 
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