Decisions regarding new investments by the Public Institution for Social Security (PIFSS) have been halted, both in local and foreign markets, since June 2022. However, the institution’s accounts have seen a notable rise in liquid assets. These increased liquidity levels stand in contrast to the institution’s strategy in place since 2017.
As a reminder, since 2017, officials in the insurance sector have embraced a strategy focused on reducing cash levels in portfolios. The goal was to achieve cash levels of 2 percent of the total value of the institution’s investment portfolio, which was approximately 42.5 billion dinars at that time, reports Al-Rai daily.
The plan aimed to utilize funds not invested, which 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, as per statements by the former Deputy Director General of the institution, Raed Al-Nisf, on August 9, 2020.
Sources have highlighted that due to the PIFSS Board of Directors not convening and subsequent lack of meetings by the Investment Committee for about 16 months, the institution did not agree to enter into any new investments. This hindered the absorption of liquidity coming in from subscriptions to pay for pensions beyond the previously approved ones. These subscriptions were limited both in number and value, in addition to the liquidity of renewable insurance investments from deposits that are necessarily renewed at the end of each term since around June 2022.
Resulting from this situation, liquidity rates at the insurance institution nearly doubled from the second half of 2022 until October 2023. The levels of illiquid assets in the institution, particularly bank deposits, now stand at approximately two billion dinars. Seventy percent of these assets are deposited in Kuwaiti banks, in addition to two deposits reserved in Lebanon with Fransbank, worth 347 million dollars.
Due to the prolonged absence of an investment decision at the insurance institution, accounting officials are no longer able to invest excess liquidity in investments outside the scope of deposits. The reemployment of accumulated amounts in investments that boost insurance returns is restricted until the institution’s investment committee convenes 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 continued implementation of the asset distribution strategy developed by Mercer LLC in 2021 requires a thorough review to account for developments in global markets, which have recently experienced significant changes affecting various sectors and once-attractive markets.
Furthermore, the sources have emphasized 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. As a result, the institution has consistently recorded investment returns ranking among the best when compared to institutions globally.
On a separate note, the sources have revealed that the Ministry of Finance has been honoring its commitment to pay the monthly subscription installments owed to the corporation by the state for Kuwaiti workers in the government, private, and oil sectors since the beginning of 2023.
Additionally, the Ministry is still paying the late installments for the last fiscal year due to the repercussions of the Corona pandemic. As of the end of 2022, these late payments amounted to approximately two billion dinars, with an average increase of approximately 50 million dinars over the installments paid since the beginning of 2023.
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