INSURANCE | Staff Reporter, Korea

South Korea zeroes in on insurers' overseas alternative investments

Local insurers suffered a total of KRW194.4b in losses from some of their investments.

South Korea’s financial watchdog has signalled that it will keep closer tabs on local insurance companies’ overseas alternative investments in the wake of losses suffered due to the pandemic, reports Yonhap News Agency.

Local life and non-life insurance firms have been rapidly expanding their investments in overseas alternative investments in a bid to cope with low interest rates and easy monetary policy.

Data from the Financial Supervisory Service (FSS) shows that local insurers' investments in alternative assets abroad came to $63.5b (KRW70.4t) as of end-September 2020. This is equal to approximately 6.5% of their total assets.

Unlike traditional assets such as stocks and bonds, alternative assets refer to higher-yielding hedge funds, real estate, and private equity funds.

Their investments had been profitable up until September last year, with total returns reaching 2 trillion won, but local insurers began to suffer losses in the wake of the COVID-19 outbreak, the FSS said.

Insurers have recorded a combined loss of KRW194.4b from some of their alternative investments due to the pandemic, and their losses could continue to expand down the road, it added.

The watchdog added that it will come up with a set of standards for the risk management of insurers' alternative investments in an effort to bolster their prudential supervision.

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