Capital-efficient alternatives for Asian insurers
Alternatives may enhance returns opportunities, improve diversification, and help insulate insurers’ balance sheets from public market fluctuations.*
- In the current market environment, insurers investing in traditional markets are facing the unappealing choice between the near-zero yields on government bonds and the exceedingly high volatility in both corporate bond and equity markets.
- We believe that Asian insurers could benefit from considering the broad spectrum of opportunities across core alternative assets, which could enhance investment returns, improve portfolio diversification, and help insulate insurers’ balance sheets. We advocate focusing on income generation, risk diversification, and regulatory capital efficiency.
- Regulatory complexity and capital efficiency of non-traditional assets are among the main hurdles on the way to better diversified, more resilient investment portfolios. This primer re-iterates the case for insurers’ investment in alternatives and looks into the treatment of key alternative asset classes under several risk-based capital adequacy regimes emerging across Asia.