The long-term investment horizons of insurance companies make them particularly suited to investment in illiquid assets, such as private equity and real estate. Preqin’s Real Estate Online indicates that 58% of Asia-Pacific-based insurance companies are either considering investing or are currently investing in real estate, the largest proportion across all alternative asset classes. Preqin’s Private Equity Online reveals that 53% of insurance companies headquartered in the Asia-Pacific region are investing or considering investing in private equity.
Preqin currently tracks 100 Asia-Pacific-based insurance companies with a preference for real estate and 92 with a preference for private equity. South Korea-based insurance companies account for 20% of the region’s real estate investor pool, followed by Japan (14%), Taiwan and Australia (12% each). Taiwan-based institutions have allocated at least $27bn to the asset class collectively, and this could be set to increase further, especially in overseas investments. As announced in March 2016, Taiwan’s Financial Supervisory Commission (FSC) raised the ceiling on the amount of capital domestic insurance companies can invest in offshore properties by re-basing the cap to risk-based capital instead of net worth. A similar dissection of private equity investors indicates that South Korea-based insurance companies make up the largest proportion in Asia-Pacific, followed by China- (20%) and Japan-based (18%) insurance companies.
For both asset classes, Asia-Pacific-based insurance companies have a preference for investment in Asia and North America. For private real estate investments, 63% of insurance companies favour exposure to Asia, followed by North America (44%); for private equity fund commitments, however, there is a much larger proportion of investors targeting domestic private equity vehicles: 89% target Asia-focused funds and 41% target North America-focused funds.
Europe is the next most favoured real estate investment destination for Asia-Pacific-based insurance companies, while for private equity, a larger proportion (40%) target investment in Greater China. In September 2015, the China Insurance Regulatory Commission allowed domestic insurance companies to establish private equity vehicles to invest in strategic industries supported by the government. By expanding local insurers’ investment channels, the Chinese regulator moves to increase commitments to the private equity fund industry by this group of investors.