Overseas Investment Limit Expanded to 50%
The amended Insurance Business Act is expected to help life insurers improve their investment returns by expanding their overseas investment limit to 50 percent from 30 percent.
According to industry sources, those insurers’ foreign-currency marketable securities totaled 112,569.8 billion won at the end of January this year, up 13.3 percent from a year earlier.
In major life insurers, the ratio of overseas investment already topped 20 percent of the total assets under their management. For example, the ratio is 28.9 percent in Hanwha Life Insurance, 25.9 percent in Fubon Hyundai Life, 25.3 percent in Chubb Life Insurance, 23.7 percent in Tongyang Life Insurance, 23.6 percent in Kyobo Life Insurance and 21.4 percent in NongHyup Life Insurance.
The amended act is likely to contribute to the business of the companies facing low interest rates, a slow economic growth and a low fertility rate. Their asset management return dropped from 5.6 percent to 4 percent from 2010 to 2015 and then to a record low of 3.5 percent in 2019. Besides, the return is predicted to keep falling in the wake of central banks’ successive key rate cuts for dealing with the repercussions of COVID-19.