PIFSS’ liquid assets doubled since 2nd half of ’22

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‘Decisions tied to fresh investments come to halt’

KUWAIT CITY, Oct 16: Decisions concerning fresh investments by the Public Institution for Social Security (PIFSS) have come to a halt, both within local and foreign markets, since June 2022. However, there has been a noteworthy surge in liquid assets within the institution’s accounts. These heightened levels of liquidity starkly contrast with the institution’s strategy that has been in effect since 2017, reports Al-Rai daily. Since 2017, insurance sector officials have embraced a strategy that aims to reduce cash levels in portfolios. The objective was to achieve cash levels amounting to 2 percent of the total value of the institution’s investment portfolio, which stood at approximately 42.5 billion dinars during that time. The plan was centered around utilizing funds that were not invested, whose proportion had decreased from 41.2 percent of the institution’s total investment portfolio as of March 31, 2016, to less than 4 percent as of March 31, 2021, according to statements by the former Deputy Director General of the institution, Raed Al-Nisf, on August 9, 2020.

Meetings
The sources have emphasized that due to the PIFSS board of directors not convening and the subsequent lack of meetings by the Investment Committee for about 16 months, the institution did not agree to engage in any new investments. Consequently, the absorption of liquidity stemming from subscriptions to pay for pensions beyond previously approved ones was hindered. These subscriptions were limited both in number and value.

Additionally, the liquidity of renewable insurance investments from deposits that must be renewed at the end of each term since around June 2022 also played a role. As a result of this scenario, liquidity rates at the insurance institution nearly doubled from the second half of 2022 until October 2023. The levels of liquid assets within the institution, specifically bank deposits, now stand at approximately two billion dinars. Seventy percent of these assets are deposited in Kuwaiti banks, alongside two deposits reserved in Lebanon with Fransbank, totaling approximately 347 million dollars. With the prolonged absence of an investment decision at the insurance institution, accounting officials are no longer able to invest excess liquidity in ventures beyond the scope of deposits.

The reemployment of accumulated amounts in investments that boost insurance returns is restricted until the institution’s investment committee reconvenes and approves its new strategy, either reverting to the 2017 strategic targets or maintaining the policy of tightening liquidity surpluses scheduled since 2022. Sources have indicated that the ongoing implementation of the asset distribution strategy devised by Mercer LLC in 2021 requires a comprehensive review to consider developments in global markets, which have recently witnessed significant changes affecting various sectors and once-attractive markets. Furthermore, the sources have underscored that insurance officials adhere to the best international guidelines and standards in managing insured funds, adopting a conservative approach that aligns with global market developments. Consequently, the institution consistently records investment returns ranking among the best when compared to institutions globally.

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