Fri, Jun 15, 2007 - Page 12 News List

Overseas investment cap raised

GOOD REVIEWS After bringing cheer to the nation's insurers, the legislature passed an amendment to the Copyright Act which was praised by record industry representatives

By Shih Hsiu-chuan,Jackie Lin, Jessie Ho and Amber Chung  /  STAFF REPORTERS

The legislature yesterday passed an amendment to the Insurance Law (保險法) to raise the overseas investment cap for local insurance companies from the current 35 percent to 45 percent of working capital.

The revision was slightly lower than the previous amendment proposed by the Financial Supervisory Commission (FSC) to raise the cap to 50 percent.

The FSC said the amount that could be invested overseas by local insurance companies would increase by approximately NT$700 billion (US$21.16 billion) as a result of the amendment.

Insurers yesterday welcomed the passage of the long-awaited amendment, which they said would boost the efficiency of their use of capital.

"This is good news," said Victor Hsu (許澎), spokesman for Shin Kong Financial Holding Co (新光金控), which owns Shin Kong Life Insurance Co (新光人壽), during a telephone interview.

Raising the investment cap would allow Shin Kong to invest more than NT$100 billion in overseas investment portfolios, he said.

But insurers will need to spend time and effort locating the best investment targets and making sure that risk management is performed.

Lee Chang-ken (李長庚), chief strategy officer at Cathay Financial Holding Co (國泰金控), which runs Cathay Life Insurance Co (國泰人壽), said early last month that the nation was awash in liquidity, which had led to poor asset investments.

The amendment has long been stalled in the legislature as some lawmakers were concerned that raising the investment cap would result in a huge capital outflow, while local insurers have seen their overseas investments approach the current 35 percent limit.

Commenting on the passage of the bill, FSC spokesperson Susan Chang (張秀蓮) said it is helpful to internationalize the local financial market as this would help weed out problem insurers.

The regulator is looking to implement stricter requirements when reviewing applications for overseas investment, Chang said without giving a timeframe. Current requirements include a capital adequacy ratio exceeding 250 percent and no imminent requirement for extra fundraising.

The new law closed the loophole whereby financial groups could launch takeovers for rivals by leveraging their insurance arms' investments, as it bans insurers from sitting on the board of a firm in which they have an investment or from supporting members of affiliated companies becoming directors or supervisors at such firms.

The Koo family were widely criticized for utilizing the working capital of affiliated China Life Insurance Co (中國人壽) when taking control of China Development Financial Holding Co (中華開發金控) a few years ago.

Also yesterday, an amendment to the Copyright Act (著作權法) concerning peer-to-peer (P2P) copyright infringement passed the legislature.

Chinese Nationalist Party (KMT) Legislator Hsieh Kuo-liang (謝國樑) said the amendment was aimed at those providing file-sharing services with the intent of facilitating the infringement of copyright, making it illegal and subjecting perpetrators to civil and criminal liability.

The amendment also gives the authorities the power to close a service once there has been a conviction, to prevent situations where offending service providers have been convicted but continue to operate with impunity during their appeal.

The International Intellectual Property Alliance, a coalition of US associations that represent copyright-based industries, has previously criticized Taiwan for a lack of stringent anti-privacy laws and enforcements against P2P privacy.

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