The possibility of expanding losses due to the impact of Corona 19
New investment and maturity reduction … last year 6.6 trillion won
[서울파이낸스 우승민 기자] The financial authorities said that insurance companies realized interest and dividend income despite concerns about the loss of foreign alternative investment assets due to Corona 19, but there is a possibility of insolvency due to prolonged economic recession, and management is necessary. Accordingly, it is planning to prepare for losses caused by prolonged economic downturn by establishing’best standards for risk management for insurance companies’ alternative investments.
According to the Financial Supervisory Service on the 22nd, the amount of overseas alternative investment by insurance companies as of the end of September last year was 70.4 trillion won, which is 6.5% of total assets. They mainly invested in an indirect way, such as buying a fund, not direct investment.
Alternative investment types are: △Real estate-related investments of 2,410 trillion won (34.2%), △SOC 20 trillion won (28.4%) △Exquisite acquisition and restructuring-related investments of 9.3 trillion won (13.2%).
The investment targets are offices: 1.09 trillion won (15.5%), power generation and energy 8.5 trillion won (12.1%), aircraft and ships 4.900 billion won, and acquisition financing such as PEFs of 4.900 billion won (7%). It was found that investment areas were mainly distributed in developed countries. Specifically, it amounts to 2.6 trillion won (38.1%) in the US, 6.500 trillion won (9.2%) in the UK, 2.7 trillion won (3.8%) in France, and 6.800 billion won (9.7%) in Europe. In particular, 63.4% of overseas real estate investment (24.100 trillion won) invested in offices, hotels, and complex facilities is concentrated in the US.
The investment timing and maturity were gradually decreasing. New investment has been shrinking since last year’s 15.500 trillion won. In particular, last year, it was found to have decreased significantly to 6.6 trillion won due to the corona 19 effect.
As such, they were also concerned about the health impact of Corona 19. Insurance companies realized profits until the end of September last year, with interest and dividend income of 2 trillion won from overseas alternative investment, but due to the fall in the value of funds for overseas real estate and aircraft investments due to the impact of Corona 19, a total of 1944 billion won in some assets. We believe that there is a possibility of loss expansion, such as incurring losses.
In addition, assets with signs of insolvent such as bankruptcy of borrowers, delays or suspension of construction, although there has not been any investment loss so far, are estimated to be 2721 billion won (0.4% of overseas alternative investment), mainly occurring in real estate-related investments affected by Corona 19. done.
Accordingly, he stressed that it is necessary to strengthen management and supervision of the loss of foreign alternative investment assets resulting from the prolonged economic recession and the impact of the health of insurance companies.
In addition, the inspection standards related to alternative investment by insurance companies were reinforced, and soundness was differentiated according to the risk of each type of investment. Specifically, △Real estate and SOC require insurance companies to self-inspect all investments and guide them to prepare an asset-related management plan for signs of anomalies △Identify the detailed status of insurance companies with a high proportion of investment, such as airlines and ships, and focus on the management status. Inspection △Inspection of the status of soundness management of securities such as funds, and guidance to prepare for loss in advance through guidance on notes △Continuous monitoring of corporate investments through acquisition financing and PEF according to each country’s corporate support programs Plan to implement.
In the future, the Financial Supervisory Service (FSS) will △ prepare and implement the’Best Standards for Risk Management of Alternative Investments for Insurance Companies,’ focusing on overseas alternative investments △ Strengthen the evaluation and inspection of the soundness of alternative investments △ Intensive management and monitoring of vulnerable companies will further strengthen management .
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