PineBridge Investments: Allocating Overseas

July 31 2017

Many insurers in Asia are thinking of expanding their portfolios overseas. They may benefit from a closer look at the composition of overseas portfolios of insurers in more mature markets, as well as from an examination of key considerations in pursuing this approach

Amid the prolonged low-interest-rate environment, insurance companies in Asia, some with historically small overseas investment allocations, are now actively seeking both yield enhancement and diversification through

their overseas investment portfolios.

In mature markets such as the US, insurance companies have a long history of overseas investing, and the allocation percentage has been very stable. In other markets, such as China, the proportion of offshore investments has traditionally been low. Increasingly over the past two years, we have been witnessing a rapid change in offshore allocations, with some markets in the region moving aggressively in this direction.

However, when considering either moving into or expanding overseas allocations, insurers should not only consider the available instruments, yield differential, investment margin, and regulation/solvency, but they should also be aware of the additional risks involved.

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