News01 Dec 2017

Hong Kong:Regulator urges ALM focus in insurers' investments

01 Dec 2017

The emergence of new advancements and initiatives, such as green bonds and InsurTech among others, are potential investment opportunities for insurers. However, investment managers should exercise due care and diligence in their selection of investments, said Dr Moses Cheng, Chairman of the Insurance Authorit (IA), Hong Kong at the 5th Asia Investment Management Summit for Insurance yesterday. In his keynote speech, he urged insurers to enhance their asset-liability management (ALM) function to better set their risk appetite for asset-liability mismatch risk and devise appropriate measures to address it.

“ALM is the cornerstone of the investment process, in which it helps insurers understand the interactions between investment risks of assets and the structure and duration of liabilities. With a holistic view, the Board and management will be better informed of the nature and evolving risks of their business and the benefits of diversification.”

Sharing an update of the IA’s progress in developing a new Risk-Based Capital (RBC) regime, he said the IA launched its first four-month Quantitative Impact Study (QIS) in late July 2017. In view of the complexity of the exercise and from past experience of other jurisdictions, more than one QIS will be necessary. The entire QIS exercise is expected to be completed in 2019, Dr Cheng said.

Separately, the IA is also in the midst of shifting to a new long-term office by 18 December, and will be expanding its staff strength from the current 180 to 300 when it starts regulating insurance intermediaries directly in mid-2019, he added.

Investment prospects never better

Meanwhile, Mr Bin Deng, Head of Group Investment Solutions & Derivatives, AIA Group, told delegates that growth prospects are good because “we’re in the right place, at the right time, and in the right industry.” Giving a world view from an insurance investment manager’s perspective, he pointed to the abundant potential in Asia’s population and emerging markets. Asia’s population, age-wise, and urbanisation have yet to peak; on top of that, the vast majority of people are under-protected and will thus need both savings and investment products to manage their wealth as they progress in life.

But even among more mature markets like Taiwan, South Korea, Japan and Australia, he noted the steady growth in demand for investment-linked products: “Investment-linked means investing in funds, different types of markets – stocks, infrastructure bonds. So from an investment manager’s perspective, it’s a great opportunity to help people.”

Turning to prospects for 2018, AMTD Group’s Head of Research Michelle Li touched on global FinTech investment trends, where delegates heard about the two largest Fintech markets in the world, each having distinct motivations. While the US FinTech market is focused on serving up better customer experiences than traditional incumbents, and lower costs, China’s FinTech startups are aimed at serving the under-banked, as well as offering one-stop-shop solutions to meet all financial needs.

However, FinTech investment in China, she said, appears to be maturing and Chinese investors have thus started to look at other emerging markets in Asia to replicate successful business models from home. Nonetheless, among other findings from AMTD’s Asian Investor FinTech survey, Ms Li noted that investors’ interests are still focused in China and the US, particularly in data analytics, wealth management and capital market-related opportunities.

The two-day conference, organised by Asia Insurance Review, and supported by the Hong Kong Federation of Insurers (HKFI), the Hong Kong Investment Funds Association, and the International Insurance Society (IIS), ends today. 

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