Taiwanese insurers lobby for more alternatives

A policy change currently under review by the island's financial regulator could unlock up to $24bn for investments in alternative assets.

Taiwanese insurers are currently waging a lobbying effort with the country's Financial Supervisory Commission (FSC) to lift restrictions on their allocations to alternative assets, Infrastructure Investor has learnt.

The island's insurance companies, some of which are close to hitting their cap on the category, hope to lift it from the current two percent maximum to a level of five to six percent.

The move comes as Asian investors seek investment options yielding higher returns amid persistently low interest rates and volatility on global markets.

According to the FSC, Taiwanese insurers had TWD19.37 trillion ($596 billion; €523 billion) in combined assets as of May 2015. Should the reform go ahead, the move could thus unlock up to $24 billion for investments in alternatives.

The island has the highest insurance penetration rate in the world, at 18.9 percent.

It wouldn't be the first time regulators have eased restrictions to help insurers widen their investment remit. From encouraging insurers to invest in companies involved in public infrastructure projects to allowing them to buy more overseas property and foreign-currency bonds, however, the measures have so far been deemed insufficient by the industry.

Negotiations for increasing alternatives allocations have been ongoing over the last few years, a source told Infrastructure Investor, adding that the change was possible but unlikely to happen in the near term.

Taiwanese insurers' quest for greater exposure to offshore bonds and alternatives are also a work in progress.

It is understood that Cathay Life Insurance, Taiwan’s largest insurance company, has been considering expanding its investment remit to include listed real estate and infrastructure. Apart from assets like treasuries, corporate bonds and blue-chip stocks, the firm is also looking at the utilities and telecommunications sectors, a source said.

Last October, CTBC Life Insurance Company committed $20 million to Stonepeak Infrastructure II. The insurance company later merged with Taiwan Life Insurance at the beginning of this year.

Other types of institutional investors from the island are also looking to gain a greater foothold in alternatives.

The Bureau of Labour Funds, which manages more than $90 billion in pension, retirement and insurance assets for Taiwanese workers, has been inviting fund managers to submit bids to run its $5.3 billion of global multi-asset portfolios across 21 five-year mandates.

Last June, the administrative body issued mandates to four fund managers to oversee its $1.8 billion in global listed infrastructure securities and $600 million in global real estate securities. In November, it mandated a further $600 million in funding to four managers, namely Cohen & Steers, Macquarie, Magellan and RREEF, for global infrastructure securities investments.