A Glance of Mandate of Investment Linked Policies in Taiwan
With the country’s notably high insurance penetration rate in globe as well as people’s good wealth and savings level, Taiwan is recognized as the most attractive market in terms of Investment Linked Policies (ILPs). Similar to Life Insurance Companies (Lifers) of all other countries, Taiwan Lifers offer ILPs that hyperlinked Insurance and funds or ETFs, for the benefit of insured’s premium protection but simultaneously offering capital accumulation interests across the investment market. Due to the fact that clients were lacking of professional investment skills and experience, separately it’s often seen case that insurance brokers in certain degree misdirect, clients ended up to result in poor performance with higher risk, deteriorating clients’ trust to insurance company.
With the evolution historically, the solution comes to place that a Securities investment Trust Enterprise (SITE) be entrusted by insurance company as the professional mandate manager. Based on the mandate profile and specific criteria set by the insurance company, the manager is discretionarily using its investment knowledge and capability to efficiently allocate assets between equity funds, bond funds and ETFs. Such mandate structure has smoothly solved the original intention of products enhancement that improving investment performance. At present, there are a total of 19 domestic insurance companies issuing ILPs, and 28 SITEs have been appointed to manage these ILP mandates in total 300 contracts (in both local and foreign currency). Foreign currency ILP mandates enjoy notable much exposure than local currency mandates. Foreign currency ILP is exposed to registered offshore funds and ETFs while local currency ILP is limited to onshore funds only. That drives clients clinging to foreign currency ILPs, which access to more global investment opportunities. According to YTD data released from Securities Investment Trust & Consulting Association (SITCA), 230 foreign currency ILP mandates sums up in total assets going of USD $27.72 billion. The industry performed continuous growth in a steady way. There’s nearly 30% YOY in 2017 restrike, though it was suffering downturn period in 2019/20, we saw the trend coming back in strong force this year. In accordance with the updated statistics of SITCA, as of June 2021, a 17.07% growth performed strongly in valid contract volumes in 1H ahead of the time.
Exhibit 1: Foreign Currency ILP mandate assets
Source: SITCA, NIC consolidated
ILP Mandates dominate SITE’s Discretionary Investment business
Foreign currency ILP mandates for a long time accounts for a big position in SITEs’ discretionary investment business, with roughly 30% in average amongst all discretionay investment busines in the past years. Alongside with the accelerating businss growth of foreign currency ILP mandates, this segment play more and more importantly for SITEs. It’s worthy pointing out the fact, with SITCA’s statistics, the exposure of foreign currency ILP mandates is achieving 40% or more, in terms of SITEs’ overall discretionary investment business. That’s the best record in the past 5 years, indicating it being one of SITE’s majoy business and keeping developing. We can accorodinly identify foreign currency ILP mandate is gearing up in SITEs’ mandate businss division to welcome the upwarding business expectation.
Exhibit 2 Breakdown of SITE Mandate types
Source: SITCA, NIC consolidated
Big asset managers dominate majority of the markets
Though we have continuously looked at the growing trend, in terms of ILP mandates, the market wallet is obtained by small portion of players, those famous branding names and those who enjoy specific resources. We may later analyze the player ecosystem in the next NIC Insight! According to SITCA’s statistics as of June 30, 2021, more than 90% of the total ILP mandate assets are occupied by top 10 managers; furthermore, 75% of them are managed by top 5, who are Cathay, AB, JP Morgan, Schroders and Fidelity, respectively.
Exhibit 3: Top 10 ILP Mandate managers in Foreign Currency
Source: SITCA, NIC consolidated
Please stay patient and wait for our next insight specifically for the peers analysis of leading SITEs managing ILP mandates in Taiwan. Market competition is always fierce, but opportunities remain for those capable and insightful! We are welcome to chat!