Cathay Life Insurance Co (國泰人壽), the nation's largest life insurer and its rivals in the nation will raise premiums on new policies next year as the gap between guaranteed returns on older policies and record-low interest rates increase.
Life insurers also agreed to cut the annual return offered on new policies to an average 2 percent starting in January from 2.5 percent this year, based on minimum required returns on investments and projected payout reserve obligations, said Lee Chang-ken (
The central bank kept its key interest rate at a record low 1.375 percent last month after the bank's quarterly policy meeting. The central bank has cut the rate 15 times since December 2000. The yield on the benchmark 10-year bond maturing in September 2013 rose 2.8 basis points to 2.7 percent at noon yesterday in Taipei.
"The rate cut amount reflects the average of past 10-year bond yields," said Pai Ming-chao, secretary of the Taipei-based Life Insurance Association of the Republic of China.
"We take the past as reference since we can't predict the future," Pai said.
A 0.25 percentage point cut in the minimum return rate represents a 10 percent rise in premiums, a Chinese-language newspaper reported earlier yesterday, citing estimates from unidentified insurers.
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