Legislature likely to ease insurers' investment cap

The Legislative Yuan is likely to approve a long-awaited proposal to raise local insurance companies' overseas investment cap during the current legislative session, the Financial Supervisory Commission said yesterday.

After intensive cross-party negotiations yesterday, lawmakers approved a proposal to raise the cap to 45 percent of an insurer's working capital from the current 35 percent, commission spokesperson Susan Chang (張秀蓮) told reporters.

The result was slightly lower than the previous proposed amendment to the Insurance Law (保險法) to raise the cap to 50 percent.

Still, the 10-percentage-point increase would mean an additional NT$700 billion (US$21.03 billion) in capital from the local insurance industry that could be invested in foreign markets, Chang said.

The proposal had long been stalled in the legislature as lawmakers were concerned that raising the investment cap would result in a huge capital outflow. The approval yesterday cleared the way for the proposal's discussion on the legislative floor.

The commission will approve insurers' application to increase overseas investment based on their corporate governance and internal control once the investment amendment clears the legislature, Chang said.

A number of local insurers, including Cathay Life Insurance Co (國泰人壽) and Shin Kong Life Insurance Co (新光人壽), have long called for a relaxation of the investment cap as their overseas investments have approached the limit.

Lee Chang-ken (李長庚), chief strategy officer of Cathay Financial Holding Co (國泰金控), said Taiwan was awash in liquidity, leading to poor asset investments. This has weakened insurers' capability to ensure their policyholders' rights and interests.

"If lawmakers can pass the amendment in the current session, we will raise our overseas investments in accordance with the new regulatory cap to pursue better returns," Lee said during a telephone interview yesterday.