Life insurance companies’ investment returns fell 30 percent year-on-year to Rp11.46 trillion ($713.6 million) in the first six months of this year. The decline was mainly due to unit-linked products, which insurers invested in equities and mutual fund instruments.
According to the Financial Services Authority (OJK), stocks and mutual funds accounted for around 26 and 14 percent of insurers’ investment portfolios, respectively. The rest are government bonds.
Unit-linked insurance plans combine insurance with an investment portfolio.
The decline in investment returns is in line with the declining performance of the IDX Composite, a benchmark for the country’s stock exchange, in the first half of this year, which the OJK attributes to investors’ perception of the country’s economic growth.
The OJK called on insurers to ensure sufficient liquidity, especially to be able to pay benefits to policyholders in the future. The authority assumes that insurance companies will change their investment allocation.
“To anticipate the decline in investment returns on stocks and mutual funds, life insurance companies need to rethink their investment strategy and switch to instruments that can offer better returns,” Ogi Prastomiyono, head of OJK’s insurance, guarantee and pension fund department, said in a statement on Tuesday.
Every Monday
Also read: OJK adds insurers and P2P lenders to credit score database
