Cathay Life has been the first firm in Taiwan to resume the issuance of an insurance-wrapped structured product since the domestic regulator lifted the restrictions on the sale of this wrapper in December 2013, which had lasted a year.
The KOSPI200-linked structured products which were hedged by ANZ Bank, have a tenor of eight years and struck in March. The capital-protected product is based on a dispersion/uncapped call payoff profile and will pay at maturity a coupon equal to 5% multiplied by the lower absolute value quarterly growth of the Kospi200 index in comparison to its level from the previous quarter, floored at 5% pa. The product is denominated in New Zealand dollars and will be converted to the Taiwan dollar at maturity.
“We launch products when there is a chance to fulfil consumer demand,” said a senior source at Cathay who wished to remain anonymous. “We know such products are popular in the market. Fixed-income products have already recorded good sales, and this structured product provides a promising headline rate plus extra profit from the growth of the underlying.”
A number of local players predicted that the earliest launch of insurance wrapped products after the lift of the restrictions would take place in the second quarter of 2014, as market players sit on the fence to see who makes the first move.
The source added that Cathay is still planning how to develop this range because it is difficult to find capable issuers that meet the regulator’s requirements. “The regulator requires a rating of above AA- rating for the issuer of the product but there are not so many issuers with this kind of rating nowadays.”
According to SRP’s database, there were 18 insurance wrapped products in 2011 in Taiwan; however this fell to only one product in 2012 and there were none in 2013.
Related stories:
Taiwan gives green light to reintroduction of insurance wrapper
Taiwan renminbi SPs retain good sales forecast despite yuan fall-linked lossesTaiwan-linked SP to be opened to Chinese investors through QDII