Overseas Investment Likely to Grow in 2021
The Korea Life Insurance Association announced on Feb. 2 that the foreign-currency marketable securities of 24 life insurance companies decreased 1.1 trillion won to 102 trillion won in November last year and the ratio of foreign-currency marketable securities to their total assets under management fell 0.3 percentage point to 17.6 percent that month.
The South Korean life insurance companies cut their overseas investment to a sizeable extent last year. This is because low interest rates continued in the wake of COVID-19 and exchange rate fluctuations led to more currency hedging costs.
Specifically, their foreign-currency marketable securities fell from 112.57 trillion won to 109.45 trillion won in the first half of 2020 and reached 107.93 trillion won at the end of the third quarter. The ratio was 19.2 percent at the beginning of 2020. The foreign-currency marketable securities of Hanwha Life Insurance decreased from 28.12 trillion won to 20.62 trillion won from February to November last year.
This year, overseas market rates are increasing along with the insurers’ opportunities. Expectations for COVID-19 vaccination and the new U.S. administration already boosted the 10-year U.S. Treasury yield from 0.5 percent to over 1 percent and the currently expected inflation is over 2 percent. The insurers are expected to increase their overseas investments under the circumstances.