APAC life insurers to maintain disciplined asset and liability management amid rising rates

Written by Adam Cadle

22/09/2022

Asia-Pacific (APAC) life insurers will remain disciplined in asset and liability management as interest rates rise, Moody’s has said.

Moody’s surveyed 16 life insurers in four markets in the APAC region, and said this discipline will “alleviate insurers’ negative spread risk and their balance sheet sensitivity to interest rate movements if insurers act as responded”.

APAC life insurers plan to moderately increase asset allocations to fixed-income investments over the next 12-18 months to take advantage of rising yields and reduce their asset-liability duration mismatches. Moody’s said they will generally be cautious about asset allocations to equities and uphold the credit quality of their bond holdings.

The majority of the 16 life insurers expect their overall investment yields after hedging costs to fall from 2021 levels in the next 12-18 months. The widening differentials between the still low interest rates in insurers’ domestic markets and the rising rates in the US are raising costs for foreign-currency derivatives, which insurers generally see outweighing rises in new money yields on bonds.

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