Asian life insurers’ investment assets will grow at a five-year compound rate of 14.7% to $US4.8 trillion ($6.4 trillion) by 2020, according to a forecast by Cerulli Associates.

China will lead the way with a compound growth rate of 17.8% to $US2.7 trillion ($3.6 trillion), the analyst says. But to achieve such growth amid low interest rates, Asian insurers must look overseas for assets.

“More assets are expected to flow overseas as Chinese insurers see a growing need for better returns outside their domestic market to help meet their liabilities. China’s life insurers have seen their liabilities rise as they tried to compete with providers of popular wealth management products by offering policies with attractive return rates, such as universal life.”

Total insurance liabilities in China reached $US1.7 trillion ($2.2 trillion) last year, up 44.5% compared with 2013.

The country’s 1.5% interest rate is affecting local insurers because they have 21% of assets in bank deposits.

“A fall in interest rates will inevitably have an impact on their investment income and will push insurers to deploy assets more efficiently by diversifying their sources of returns, including overseas,” Cerulli Associates says.

“But investments in the ‘others category’ – including listed and unlisted long-term equity investments, bank wealth management products, trusts, private equity, venture capital, loans and real estate – rose from 23.7% in 2014 to 34.2% in June this year.”