Offshore insurance that offers 6 to 7% annual returns is gaining popularity among wealthy investors residing in Seoul’s upscale Gangnam District, South Korea. This type of insurance allows Korean investors to enter into agreements with foreign insurers directly, similar to purchasing clothes from an overseas shopping mall.
Unlike local insurance, offshore insurance policies are sought after for their retirement security benefits and dividend payments, presenting a safer alternative to stocks and funds while yielding higher returns than bonds.
Insurance policies offered by insurers operating in Hong Kong - AIA, Prudential and AXA - are particularly favored among Korean high-net-worth individuals and professionals such as lawyers and doctors, according to the local financial sector on Feb. 13.
According to a savings plan offered by an insurance company in Hong Kong, a 40-year-old man who contributes a total of $90,000 over five years - at an annual rate of $18,000 - can expect to amass $397,120 by the time he reaches 70 and starts receiving his pension. This principal is assured 13 years after the policy is purchased. Compared to a pension savings insurance policy that a Korean life insurance company introduced last year, the projected annuity is more than double.
Foreign insurers can provide substantial returns through dividends. These offshore insurance policies typically operate on a dividend-paying model, where the insurers invest premium payments in various assets such as stocks, mutual funds, bonds, and real estate to generate profit. The Hong Kong-based insurance policies return 90% of earnings to policyholders annually while retaining 10% of the profits. Since dividends are distributed annually, the policyholder’s savings grow over time.
This contrasts with Korean insurance products, which do not offer dividend payments, funneling all investment income to the insurers instead.
“While offshore insurance policies advertise annual returns as high as 6 to 7%, actual returns may vary depending on the performance of the investments,” said an industry insider. “But regarding how well foreign insurers perform in terms of dividend payouts, they typically hit the 100% mark.”
