Insurers from mainland China could increase overseas investments by US$100 billion over the next three years, according to a study by international financial group BNP Paribas. The insurers are seeking to diversify risks by purchasing securities, private equity, and real estate abroad.
However, this is not a knee-jerk reaction to the devaluation of the yuan, but instead is due to insurance’s desire to obtain stability and sustainability over the long term, Philippe Benoit, head of Asia Pacific at BNP Paribas securities services, told
Reuters.
“These are long-term investment decisions ... not based on what you’re reading in the press,” Benoit said. He also added that the situation of the yuan only played a minor role in insurers’ decisions.
BNP Paribas surveyed China’s top 20 insurers, and over half of its respondents said that their companies plan to increase their overseas assets by 5% to 10%.
Under Chinese financial regulations, insurers can invest up to 15% of their assets overseas, but currently only 2% has been placed abroad, showing that this could be a long-term trend.
In response to capital outflows that contribute to the pressure on the yuan, Beijing has increased its efforts to keep money in the country. China has further scrutinized outbound investment, and tightened rules on overseas yuan loans.
Several Chinese insurers have gone on overseas acquisition sprees recently, such as
Ping An Insurance Group and
Anbang Insurance Group, to name a few.
By the end of 2015, Chinese insurers had overseas assets worth US$36.7 billion, 51% higher than the previous year. However, this is just 2% of total insurance industry assets, totaling RMB12 trillion (US$1.74 trillion).
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