News01 May 2017

Japan:Insurers turning to project financing for higher yield

01 May 2017

Japanese insurance companies are beginning to play bigger roles in the loan markets, including building up their lending teams, reports Reuters. This is seen as a move that gives project financing (PF) a particularly significant boost.

Nippon Life Insurance, Japan's largest private-sector life insurer, established a structured finance department on 1 April to invest in domestic and international PF to generate greater returns. The insurer aims to invest JPY1.5 trillion (US$13.77 billion) in growth areas, including onshore and offshore PF, over the next four years.

Shinji Kuge, who heads Nippon Life's structured finance team, said: "Negative interest rates made us consider this kind of investments. We decided to pursue opportunities outside Japan in order to secure higher margins and grow our revenue."

The insurer has already invested over JPY300 billion in the last two years in structured finance loans, such as domestic PF, leveraged buyout financings and hybrid financings.

In February, Nippon Life bought a US$100-million piece of a loan backing an LNG project in the US in secondary, marking its first overseas PF investment. It follows peer Dai-ichi Life Insurance's investments in the first quarter this year.

The second-biggest private life insurer bought a JPY5.7-billion piece in a PF backing LNG plants in Qatar and a EUR30-million (US$32 million) portion in a PF backing offshore wind-power plants in Germany. Dai-ichi Life has invested over JPY100 billionn in growth areas, including infrastructure-related loans and aircraft financing in the last fiscal year ended 31 March 2017 and plans to expand further this fiscal year ending 31 March 2018.

"Our target for this fiscal year (ending March 2018) is 20%-30% more than what we invested in the previous FY. We are beefing up the team, too," said Akinao Nishio, deputy general manager of structured finance group, fixed-income investment department at Dai-ichi Life.

In February, Japan Post Insurance, the country's largest insurer in asset terms, made its first PF investment, committing about JPY10 billion alongside Dai-ichi Life Insurance in loans backing two mega solar plants in Japan.

Nippon Life and Dai-ichi Life have appetite for offshore wind-power projects, which are expected to take off in Japan in the coming years.


 

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