China Taiping 2019 participating fund performance is 4.6%. Was considering it with low WL premium of all. Next worst 2019 performing insurer at 9.5%, does it affect to payout and surrender value?

Hi there,

Yes, your policy payout and surrender values are linked to the insurer's participating fund performance.

All insurers have the same illustrated rate for endowment policies, ranging from 3.25 - 4.75%. Its the insurer's responsibility to manage the said funds, to get the illustrated returns for the clients.

Depending on the asset allocations, and different investing strategies due to the different geographic locations, you must understand that Chinese insurers invest heavily in PRC bonds. Net investment yield is 4.6% as you stated, with the parent company reporting a yield of 4.72%. Do understand that this is a challenging time, as interest rates are low. It is hard to find safe returns, especially if you are investing in one geographical location.

At the end of the day, you want to choose a company that has a strong standing financially, so that it can guaratee your projections and continue to maintain a presence within Singapore. Low premiums can easily translate to higher premiums in the future, when there is not a significant client pool.

You will have to do your own due diligence, because the numbers you are looking for will not be found by an agent. You will need to look further into the numbers, to see how the company is doing, and you will have to arrive to a conclusion on whether you want to take up a policy from an insurer just because it has the lowest premiums.

Hope i was able to shed some insight on your situation!​​​

It's too new to tell honestly. The 4.75% column is what we consider full bonuses. Or what you will get unless the insurer cuts bonuses.

Usually an insurer will only cut bonuses when:

1) The long-term expected rate of return on the par fund decreases below 4.75% p.a. That's the key here. MAS believes that the current par fund allocation rate of around 60% Bonds, 35% Equities, 5% Property/Cash has a historical rate of return north of 4.75%.

Only if the long term future returns of this changes, then insurers may adjust bonuses to remain sustainable.

2) One time catastrophic events. In 2008 during GFC some insurers were forced to cut bonuses for just that one year. Especially those who were a little too aggressive in their allocation.

But the following year, all bonuses were back to normal. So that one year, RB or TB rates were cut so you made less for that one year alone.

3) Bad claims experience. Should an insurer pay out more claims than expected and pre-calculated by their actuaries and underwriters, bonuses may need to be adjusted to make up for the underwriting loss. Premium rates for non guaranteed benefits may also be adjusted and new plans may be offered with those revised rates.

So unless any of the above 3 occurs, your bonuses will be paid.

There's also extra incentive to pay full bonuses as there is a law by MAS that forces insurers pay $9 to policy holders for every $1 paid to shareholders. This is still holding on to the old mutual life insurance systems where policyholders were once also shareholders.