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Derivatives

Korean Insurer Eyes Derivative Debut

Seoul-based Daehan Fire & Marine Insurance, with over USD700 million in assets, is considering using credit and equity derivatives for the first time. Sei Young Park, manager of the investment department, noted that it expects the equity market to lose some steam after this year's gains and will look at boosting yield via such products as equity-linked notes and credit derivatives next year. "We'll look at reallocating our portfolio then and possibly increase our bond holdings as well as use derivatives," said Park. Daehan has already put structured derivatives, such as credit-linked notes and synthetic collateralized debt obligations, under the microscope this year (DW, 4/6), but the strong performance in the domestic stock market means the insurer wanted to remain overweight in equities.

Park continued that Daehan has been speaking with several houses in regards to derivatives, including ABN AMRO, Deutsche Bank, and Morgan Stanley. Daehan selects counterparties primarily on the basis of pricing, noted Park.

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