Opportunities within the Asia-Pacific insurance industry are emerging as these insurers have grown rapidly in the last 20 years. Despite regulatory tightening from 2023 in most markets, asset accumulation has reached a stage where investment income has become more important than insurance underwriting.

Insurance assets are an important source of mandates in the Asia-Pacific region, which is split into different stages of asset growth. Southeast Asian markets are still in growth mode, whereas North Asian markets are mature with already sizable assets for investment. Moreover, after more than a decade of investing in risk assets, North Asian insurers have exhibited a significant appetite for alternatives and overseas assets. Thus, Asia’s insurance segment offers interesting opportunities for asset managers to build their pipeline of mandates.

Asia-Pacific investable life assets constituted 26% of total institutional investable assets in the region in 2021. Addressability is most prominent in mature markets such as Korea and Taiwan. Having built risk appetite over the years as their investable assets snowballed, insurers in the region are able to stomach more volatility in their portfolios and venture into markets less invested by emerging market insurance companies and more domestically oriented Chinese insurance asset allocations. Korean life insurers are often seen in many alternative investment ventures, while Taiwanese life insurers have a huge appetite for overseas assets as the local equity market is very volatile, and the local bond market is too shallow with low yields compared to overseas bonds.

Meanwhile, consolidation is ongoing in some Asia-Pacific insurance markets. This is particularly so with the risk-based capital (RBC) regime and implementation of the International Financial Reporting Standard (IFRS) 17 tightening profit margins of insurers and reducing the flexibility of capital to take more risks in both business operations and investments. According to the research, this could lead to companies with weaker finances exiting the businesses or businesses with high net income margins trying to sell out at the most opportune time.

Cerulli believes that consolidation will help ensure the viability of the sector amid slower growth, regulatory interventions, and insurance affordability issues. “By consolidating, insurers can better scale and focus on growing their business and strengthening product lines,” said Soo Ah Ran Cho, associate director with Cerulli.

“While the concentration of assets among fewer and larger players limits the number of insurers asset managers can work with, it also means that there are bigger pools of assets to target. This will help ensure the long-term stability and sustainability of the sector,” she added.