Allianz in May 2018 finalized the sale of part of its Taiwan business’s traditional life insurance portfolio to China Life Insurance. The deal had been announced in January 2018 [1].
The portfolio includes around $1.4 billion of reserves in guaranteed interest contracts (GIC) that carry a 4 percent or higher guarantee. Under the Solvency II (S2) regime, GICs are particularly expensive in terms of capital requirement, especially when market rates are lower than the guaranteed rate. This is likely to have been a key driver behind Allianz’s divestiture. Expect more S2-regulated (read European) insurance carriers entering into so-called regulatory arbitrage in the coming months.
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