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Watchdog to step up supervision of insurers' overseas alternative investments

All News 14:08 February 22, 2021

SEOUL, Feb. 22 (Yonhap) -- South Korea's financial watchdog said Monday it will keep closer tabs on local insurance companies' overseas alternative investments amid the fallout from the coronavirus pandemic.

The move comes as insurers suffered losses from some overseas alternative investments last year in the wake of the prolonged coronavirus outbreak.

South Korea's 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.

According to the Financial Supervisory Service (FSS), local insurers' investments in alternative assets abroad came to 70.4 trillion won (US$63.5 billion) as of end-September last year, or 6.5 percent 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 till 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 194.4 billion won from some of their alternative investments due to the pandemic, and their losses could continue to expand down the road, it added.

The watchdog said 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.

Watchdog to step up supervision of insurers' overseas alternative investments - 1


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