JAPAN INSURERS SEARCH IN VAIN FOR "SUITABLE' INVESTMENTS

JAPAN INSURERS SEARCH IN VAIN FOR "SUITABLE' INVESTMENTS

Japanese insurers are so flush with cash they almost don't know what to do with it, but the private investment market isn't getting a piece of the action.

The insurers said they continue to face a dilemma because the "expected payout rate" they guarantee to their policyholders is still set above the rate of return available on domestic investments."We and the industry as a whole are in a tough situation. No matter where we turn, there are no suitable investments," said a spokesman for Dai- Ichi Life Insurance, Japan's No. 2 insurer with 22 trillion yen ($209 billion) in assets.

"We have a problem. We don't know what to do with our money," said a manager at competitor Yasuda Mutual Life Insurance Co.

The insurers negotiated with the Ministry of Finance to reduce the expected payout rate to a unified 4.75 percent as of April 2. The rate previously ranged from 5.50 percent for policies exceeding 10 years to 5.75 percent for shorter maturity policies.

But many now believe the reduction was not sufficient.

Japanese government bonds, currently yielding more than 100 basis points below the expected payout rate, offer little solace.

But the insurers are also averse to foreign exchange risk and are curtailing investments abroad.