Sat, Jan 22, 2011 - Page 12 News List

FSC mulls tighter assets, risk controls for insurers

By Crystal Hsu  /  Staff Reporter

The Financial Supervisory Commission (FSC) said yesterday it was mulling tightening risk control and asset management measures governing insurance firms in a bid to prevent land hoarding.

The announcement came after a meeting with academics and industry representatives amid growing concerns that land hoarding by insurance companies may have contributed to soaring property prices.

“It is time the commission revisit risk controls and asset allocation rules to better reflect changes in the macro-environment in the past two years,” it said.

While the commission did not specify what measures it plans to take, the Chinese-language United Evening News reported yesterday that it was mulling raising the risk-based capital ratio from the current 200 percent, as well as the rate of return on real estate investment to 2.2 percent, from 1.2 percent now.

“Two years have passed since the commission introduced the principle of ‘prompt and profitable utilization’ to govern real estate investment by insurance firms,” the commission said at the meeting.

The principle, which refers to a requirement that insurers should develop land that they have purchased and ensure reasonable returns, was introduced in 2009 to help stem land speculation.

The report said the commission was now considering requiring that land acquisitions should come with development permits showing that construction would start within three months.

Insurers should apply for development permits six months after acquiring land that do not have building permits yet, it said.

Insurance officials at the commission were not available to comment on the report.

The commission held a separate discussion with domestic lenders to seek their views on cross-strait banking deregulation.

Local banks have been pressing the commission to ease lending limits for their branches in China, as well as lowering requirements to conduct yuan operations.

FSC officials are scheduled to meet their Chinese counterparts in March for talks on these and other issues, in line with the Economic Cooperation Framework Agreement (ECFA) signed in June last year.

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