Asian insurers are planning a $75 billion investment in global real estate.

According to CBRE, the growing liberalization of regulatory restrictions on Asian insurance funds could result in an additional US$75 billion entering global real estate markets by 2018, with New York and London as prime targets. qatar property

Because of stringent regulations, especially around overseas properties, insurance companies in Asia are generally under-allocated to real estate. The majority of their international assets are liquid and clear, such as equities, cash, fixed income, and government bonds. This situation is changing, as many countries, including China, South Korea, and Taiwan, have begun to encourage overseas direct investments, increased real estate allocation, and a streamlined approval process.

The Asia insurance sector's asset size is also rapidly increasing, having risen by 13% between 2008 and 2013. According to CBRE, Asian insurers' investment assets will rise from US$130 billion in 2013 to US$205 billion in 2018 as a result of the combined impact of rising asset sizes and increasing liberalization. This will result in an additional US$75 billion in real estate investment, including both direct and indirect real estate investment.

In comparison to developed markets, Asia has a scarcity of investible assets. More Asian insurers are participating in global markets as a result of this, as well as recent rule relaxations. Outside of Asia Pacific, Asian insurers spent around US$2.4 billion on direct commercial real estate acquisitions in 2013. These insurers typically have a strong preference for trophy assets in gateway cities, particularly when making their first international investments. London and New York are the most popular cross-border destinations, but where their insurers want to invest varies by region.

Due to a lack of opportunities and low yield levels for prime core assets in their home markets, Chinese and Taiwanese insurance companies are likely to be more involved in overseas real estate markets. Given their preference for full ownership, direct real estate investment would be their preferred channel. Overly aggressive overseas acquisitions in the 1990s harmed Japanese insurance companies, so they are forced to remain in the domestic market. Over the years, South Korean insurance firms have made investments abroad and gained expertise in international real estate markets. Korean insurers are expected to use more indirect channels to extend their global portfolios, according to CBRE.

CBRE Global Capital Markets Executive Director Marc Giuffrida tells World Property Channel, "Due to low yields and a scarcity of investable stock, especially stabilized income-producing assets in domestic markets, Asian insurance companies will be forced to look for opportunities in international markets. Due to a lack of overseas real estate investment expertise and regulatory approvals, operation is likely to be restricted at first to larger insurance companies with strong financial capabilities securing assets in major global cities; however, as experience grows, we expect tier two players to emerge in cross-border acquisitions and pursue indirect strategies."

Ada Choi, Senior Director of CBRE Research, also had something to say about it "According to CBRE, Asian insurers' real estate capital deployment will rise in lockstep with the sector's total asset size over the next five years. In the long run, insurance company liberalization would accelerate the speed of Asian insurance companies' foreign real estate investments. As regulators gain more interest in monitoring such investments and insurance companies become more savvy about investing internationally, we expect more relaxation on overseas real estate investment."

Total insurance assets in Asia hit US$6.7 trillion at the end of 2013, up from US$5.8 trillion in the US and US$3 trillion in the UK, according to insurance regulators in ten Asian jurisdictions. Japan has the largest insurance industry in terms of assets, with US$3.3 trillion under management, with the remainder owned by insurers in China, South Korea, and Taiwan. These four countries collectively manage roughly 90% of Asia's insurance assets.

Giuffrida went on to say, "Asian insurance firms have seen the benefits of growing their exposure to global real estate for pension plans and sovereign funds. Importantly, both regulators and investment committees now have facts and precedent to point to, which can allay fears about risk/reward tradeoffs."

According to industry figures, real estate accounts for just 2% of Asian insurers' portfolios at the end of 2013 - US$130 billion, which includes both direct and indirect real estate investments - with 1.0 percent in China, 1.8 percent in Japan, and 2.4 percent in South Korea. In contrast, developed economies usually devote 4-6 percent of their assets to real estate, with the United States accounting for 6.7 percent and the United Kingdom for 5.1 percent. Taiwan is the only Asian market with a comparatively large real estate allocation of 4.8 percent; however, this capital has been stuck within Taiwan, with foreign investments only permitted since 2013.

Asian insurers have also seen rapid growth in recent years, owing to low penetration compared to the west and rapid economic growth. Over the past five years, insurance rates in China have increased by more than 10% a year on average. Furthermore, the insurance industry in Asia still has a lot of room to expand.

Deregulation in the United States, Country by Country

Different countries in Asia take different approaches to liberalization:

Over the last two years, insurance companies in China, South Korea, and Taiwan have relaxed their real estate investment policies by increasing their overall real estate allowance and permitting, as well as streamlining the procedures for investing in property abroad.

In 2012, China permitted insurance companies to invest abroad, and in February 2014, it increased the overall allocation of real estate (both domestic and foreign) from 20% to 30% of total assets.

Since 2013, the Taiwanese regulator has permitted insurance companies to invest overseas, and they can now use shareholder loans to finance their overseas acquisitions.