First of all, the investment of DNBH must comply with basic principles such as: safety, profitability, ensuring regular payment ability as well as diversifying investment portfolios to disperse risks.
Therefore, insurance companies can consider implementing the following solutions: First: It is necessary to develop a suitable investment strategy.
Investment strategy plays a very important role in investment activities in the conditions of capital markets and financial markets that are always moving and changing. This is especially important for investing idle capital in professional reserves in life insurance companies. A correct investment strategy will increase the ability to bring profits from the invested capital, contribute to increasing the ability to pay for the insured, and improve social welfare.
Insurance companies need to develop financial investment strategies in each period, for each type of investment asset, and at the same time flexibly shift investment between investment assets to suit the business activities of the company; in accordance with economic development and capital market development in each period.
Second, state-owned insurance companies need to continue to diversify their investment portfolios, expand and increase investment in infrastructure construction projects. At the same time, they must have a flexible and solid investment strategy in the stock market and consider this a basic, long-term strategy. According to the experience of insurance companies in developed countries, investing in stocks is the most suitable investment portfolio for insurance companies. This can be seen through some figures on the investment issues of European insurance companies in 1997 as follows:
Table 5: Capital investment structure of European life insurance companies
( Unit: %)
Neck | Left | Any | Send money | Invest | Total | |
Countries | vote | vote | dynamic | into the | other | source |
product | organization | capital | ||||
credit | private | |||||
use |
Maybe you are interested!
-
Discussing investment activities in life insurance companies - 2 -
Viewpoints on Perfecting State Management of Business Activities of Non-Life Insurance Enterprises in Vietnam -
State Management Experience on Business Activities of Non-Life Insurance Enterprises of Some Countries -
State management of business activities of non-life insurance enterprises in Vietnam - 25 -
Developing non-life insurance activities in Vietnam - 1
4.1 | 27.1 | 67.6 | 1.1 | 0.1 | 100 | |
Belgium | 3.4 | 22.4 | 70.1 | 2.9 | 1.2 | 100 |
Denmark | 2.5 | 34.1 | 58.2 | 0.5 | 4.7 | 100 |
France | 5.7 | 16.0 | 73.9 | 1.8 | 2.6 | 100 |
Older brother | 5.6 | 51.2 | 33.6 | 1.9 | 7.7 | 100 |
Sweden | 4.7 | 48.3 | 46.2 | 0.5 | 0.3 | 100 |
Switzerland | 10.2 | 24.6 | 58.4 | 3.6 | 3.2 | 100 |
Germany
( Source: Economic Research Journal No. 276 ) Third: Focus on investing in stocks.
To penetrate the stock market, insurance companies need to specialize in capital investment like the investment model that Bao Viet has implemented - that is, establishing a capital investment management company, also known as an asset management company. These management companies are indispensable for insurance corporations in a market economy.
In securities trading, life insurance companies should focus mainly on state securities such as bonds, state treasury bills, state bonds... These are securities with not low interest rates but are considered to have the lowest risk.
With the advantage of information, state-owned insurance companies need to find and buy high-tech stocks and bonds. According to the experience of securities investors in other countries, investing in high-tech securities is a highly effective investment strategy. However, it is necessary to determine that the capital source for investing in these types of securities must be long-term capital.
Fourth: Insurance companies need to boldly research investment strategies in the real estate sector. Although in recent years, the real estate market has had unpredictable fluctuations, especially land. But in the current wave of migration and urbanization, investing in this sector is also an effective investment direction. Real estate investment not only brings direct economic efficiency but also brings very important advertising benefits.
Real estate investment always accounts for a large proportion of the investment portfolio of insurance companies around the world. However, in Vietnam, where the State does not recognize land ownership and transfer procedures are very complicated, investing in this field will encounter many difficulties. To participate in this field, insurance companies can form a joint venture with an experienced company with legal status in construction and real estate business.
In countries with developed insurance markets, insurance companies are always present in major cities. This is the best advertisement for the image and financial strength of the insurance company. At the same time, investing in real estate is also an investment field that allows insurance companies to fight risks most effectively.
Fifth: Expanding the form of lending to life insurance policyholders. In life insurance technology, after a certain period of paying insurance premiums, the insurance contract will have a mathematical reserve - the above amount belongs to the policyholder. If the insurance company lends to the policyholder, the reserve amount is considered as collateral. This will be very effective, ensuring that the insurance company earns higher interest than the technical interest, and helping policyholders borrow capital during difficult times. This will increase the ability to maintain life insurance contracts.
Sixth: Insurance companies need to improve professionalism and investment efficiency through asset management companies with the following models considered:
Diagram 2: Hypothetical investment model of insurance companies.
Company Investment Fund
(Fund family)
S1 Fund Management Board
S3 Fund Management Board
S2 Fund Management Board
Contract Contract
Fund management company (direct or joint venture)
This fund model can both ensure the requirement of harmony between liabilities and assets, improve the professionalism of investment activities and acquire advanced investment skills.
In addition, improving professionalism in investment by training and developing a team of good professional staff, knowledgeable about financial markets and financial investment to carry out investment activities is very necessary. It contributes to ensuring safer and more effective investment activities in the current strong development trend of domestic and foreign financial markets.
Seventh: Strongly develop life insurance types to attract long-term investment capital. Currently, in the life insurance market, in addition to Bao Viet, there are 4 joint venture insurance companies and 100% foreign capital. The competition is extremely fierce. Foreign insurance companies have brought about fundamental changes in the way life insurance is done. To stand firm in the competition, state-owned life insurance companies, on the one hand, must change their commercial policies, especially their marketing policies, to make insurance products more attractive. On the other hand, they need to diversify their products.
insurance products to meet the diverse needs of customers. Success in attracting insurance premiums will be an important starting point for the investment strategy of state-owned insurance enterprises.
Eighth: The current trend is that bank interest rates are decreasing. Compared to the same period in 1995, term deposit interest rates have decreased by about 30%. This is the direction of the State to promote investment and stimulate production. In the coming time, according to the State's policy, interest rates will be reduced even further. With such a trend, investment in bank deposits will enjoy lower interest rates than other investment sectors.
Along with deposits, the interest rate on investment in government bonds will also decrease. In fact, in the past, the source of purchasing treasury bonds directly from the treasury has been stopped. The source of treasury bonds is currently only through bidding at the State Bank, commercial banks due to debt restrictions have focused on bidding sources in this market to solve their mobilized capital. That leads to the winning interest rate continuously decreasing and down to 10.65% in recent bidding rounds compared to 17% in 1995.
In that situation, it is necessary to shift the investment direction of life insurance companies to long-term. However, businesses must determine the appropriate investment ratio. However, even if it is more effective, it is not possible to put all capital into long-term investment but it is necessary to diversify investment portfolios. Should insurance companies simultaneously lend, deposit term deposits at banks, buy government bonds, buy shares of companies, and contribute capital to joint ventures with other companies; in which investment in joint ventures and shares should be promoted, especially for state-owned insurance companies?
However, depositing money in banks is still a necessary investment item to ensure the regular payment capacity of insurance companies when there is a need for payment. In addition, government bonds are also indispensable in the investment portfolio. Lending activities, insurance companies can consider increasing medium and long-term loans; can also consider lending in foreign currency to domestic organizations.
The experience of insurance companies in other countries is that to diversify their investments, they invest about 20% in loans, about 25% in real estate, about 30% in stocks and the rest in other fields.
Ninth: Interest rate risk control policies for life insurance companies:
As studied above, interest rate risk has a great impact on improving investment efficiency of life insurance companies. Therefore, life insurance companies must have appropriate policies to control these risks.
+ Determine safe insurance premiums and maximize commercialization of insurance products. Interest rates and insurance premiums are inversely correlated:
High assumed technical interest rates will result in low premiums, in which case the insurer will face the risk of falling market interest rates.
On the contrary, a low technical interest rate will make the insurance premium high, which reduces the attractiveness of the insurance product. So what is a reasonable technical interest rate? That is a question that is not easy to answer.
DNBHNT can use a number of different methods to estimate technical interest rates. According to the experience of many insurance companies, interest rates are determined in the following common ways:
Setting the technical interest rate equal to the average return on the current portfolio is how US life insurance companies calculate premiums for new products.
Fixing the technical interest rate according to the state credit interest rate. This is the method of French life insurance companies. These companies fix the technical interest rate at 60% of the average interest rate of state credits.
In the investment environment of Vietnam, the second method of determining technical interest rate is more suitable because this interest rate is not too low and insurance companies can choose the least risky investment, smaller than government bonds. However, there is no need to be too cautious. Technical interest rate is equal to government bond interest rate when ensuring safety for insurance companies.
Pricing with a safe technical interest rate will allow life insurers to hedge against the risk of falling interest rates, but will make the product less attractive due to high premiums.
To ensure the attractiveness of life insurance products, life insurance companies must introduce mechanisms: profit sharing, indexing the insurance amount, guaranteed interest rates. However, these mechanisms are difficult to understand for policyholders, so life insurance companies must implement well the most important commercial policies, especially marketing policies, to provide the best advice to customers. By
With these policies, life insurers can attract policyholders through other aspects of life insurance products besides price.
In short, to be able to implement investment strategies and solutions well, insurance companies need to build appropriate investment strategies; diversify investment categories; focus on stock investment and boldly research real estate investment strategies. At the same time, there needs to be a certain investment in training investment staff; strongly develop life insurance types, diversify products to meet customer needs, increase premium revenue, and create investment capital. Investment can only be effective when there are creative, experienced and talented investors, and a diverse product system. In addition, modernizing facilities and information technology in the insurance business sector is also an indispensable condition for improving the investment capacity of insurance companies in today's increasingly competitive environment.
The trend of integration and the process of economic globalization also makes Vietnamese life insurance companies face fierce competition from foreign insurance companies with much stronger financial potential, high professional qualifications and longer accumulated business experience through operations in the international and regional markets. Competitive pressure is reflected in many aspects such as service quality, insurance products, service prices, insurance products... Life insurance activities also have to face competition from other forms of services such as banking and securities. The forms of bank savings, securities investment... are proving to be more dominant and attractive to investors. Therefore, it is extremely necessary to pay attention to and improve the investment efficiency of life insurance companies to stand firm in competition in the market.
Conclude
Through some analysis and the above situation, it shows that financial investment in life insurance enterprises is extremely important. This is an issue not only for insurance enterprises but also for relevant state agencies to have appropriate strategies and measures in managing investment activities of life insurance enterprises.
Investment activities of life insurance companies are affected by many factors and are also governed by the business strategy of the company in the market. Investment forms need to be diversified to minimize risks and ensure the capital investment principles of the insurance company. Life insurance companies should focus on investment but not pursue profits, violate investment principles that negatively affect the insurance business and the reputation of the company.
Based on the experience of organizing and conducting investment activities in many countries around the world and based on the specific socio-economic conditions of the Vietnamese insurance market, Vietnamese life insurance enterprises should focus and pay more attention to their financial investment activities. At the same time, it is necessary to consolidate and improve the efficiency of investment activities through appropriate investment strategies and measures.
Unlike other types of business, life insurance is a very sensitive and new type of financial consulting service in Vietnam. Our country's economy is facing optimistic signals in innovation and development, thus opening up new opportunities for life insurance companies to affirm their role and position in the market. And the results of the investment activities of idle capital of enterprises are one of the decisive factors.