Taiwanese life insurers have been investing in higher-risk assets for better yields, leaving their capitalisation vulnerable to unfavourable capital and currency market movements, according to a Fitch Ratings’ report.
The ratings agency said Taiwanese life insurers have increased overseas investments, mostly fixed-income, since the early 2000s, and have shifted their portfolio from treasuries and agency bonds issued by developed countries to the corporate bonds, financial debentures and sovereign bonds of emerging markets.
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Fitch said overseas investments accounted for 52.9% of invested assets at the end of May 2015 compared to 37.7% at the end of 2011.
Domestic equities and property investments also increased to 7.3% and 6.4% of invested assets from 6.2% and 4.7% at end-2011, respectively.
In contrast, Fitch said non-life insurers have adequate capital buffers to withstand investment volatility and potential catastrophe losses, with an aggregate equity-to-assets ratio of 33% at the end of April 2015.
