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.
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.