APAC life insurers will remain disciplined in asset and liability management despite rising rates: Moody’s

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A recent Moody’s Investors Service survey of rated insurers in four Asia-Pacific (APAC) markets shows that insurers will remain disciplined in asset and liability management as rates continue to rise.

In a recent report published by Moody’s, the company noted that it would reduce the risk of negative spreads for insurers and the sensitivity of their balance sheet to interest rate fluctuations if insurers act as they answered,

The report also indicates that APAC life insurers plan to increase asset allocations to fixed income investments over the next 12 to 18 months, in order to take advantage of rising yields and reduce their asset duration mismatches. -passive.

However, Moody’s noted that it believes insurers should increasingly consider the characteristics of their policy liabilities when developing asset allocation strategies as they prepare for capital requirements under new advanced risk-based capital regimes, as well as IFRS 17, which is expected to be implemented in January 2023.

The majority of the 16 Investor Services survey respondents expect the overall return on their investments after hedging costs to fall from 2021 levels over the next 12 to 18 months.

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In addition, differentials between still-low interest rates in insurers’ domestic markets and rising U.S. rates are increasing the costs of currency derivatives, which insurers generally view as more important than increases in currency yields. fresh money on bonds.

Finally, Moody’s concludes that insurers will continue to be disciplined in liability management as approximately 94% of survey respondents do not plan to increase their guaranteed rates in the next 12 to 18 months.

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