The Financial Supervisory Commission (FSC) is considering giving domestic life and non-life insurance companies more flexibility in asset allocation to boost their profitability so long as the easing does not compromise financial transparency and accountability.
The deregulation plans, with some measures likely to take effect next week, came after the regulator recently tightened real-estate investment requirements, leaving the sector awash in liquidity.
“The planned deregulation of stock investments may be realized sooner because it does not require legal revisions,” Joanne Tseng (曾玉瓊), director-general of the commission’s Insurance Bureau, said by telephone.
The commission currently caps equity investments for life and non-life insurers at 5 percent of their capital. If the investment based on mark-to-market value exceeds the 5 percent ceiling the commission can ask companies to trim their positions to diversify risks.
The requirement adds volatility to the local bourse when share prices climb higher than the threshold, even if they pass the test at the point of purchase.
The commission plans to limit the restriction to the point of purchase, allowing companies more leeway in stock investments, Tseng said.
The planned relaxation would benefit non-life insurers because they are more susceptible to stock volatility than life insurers due to their smaller assets.
Local non-life insurance companies have a collective capital of NT$253.9 billion (US$8.73 billion) as of the end of September, compared with NT$1.28 trillion for life insurers, Taiwan Insurance Institute (保發中心) statistics showed.
Stock investments totaled NT$27.9 billion among non-life insurers, accounting for 14.37 percent of their investment funds, the institute said.
Meanwhile, the commission plans to give life insurers more room to make real estate investment abroad after FSC chairman Chen Yuh-chang (陳裕璋) met with life insurers on Monday.
“The commission agrees to more liberalization on the issue and will promulgate details once they are ready,” Tseng said.
Specifically, life insurers have pressed for greater exposure in China, which is currently limited to 10 percent of overall foreign investments.
Hsu Shu-po (許舒博), chairman of the Life Insurance Association of the Republic of China (壽險公會), suggested that the commission raise the ceiling to 20 percent, allowing the sector to invest NT$1 trillion in China, from NT$540 billion at present.
Life insurers would also like to see increased channeling of funds into commercial properties in China, from the current 10 percent of their net worth to 3 percent of total assets under management, Hsu said yesterday by telephone.
“The easing could unleash NT$330 billion more in property funds across the strait,” Hsu said.
To better execute property investments, the sector is pushing for the establishment of a “special-purpose vehicle,” whose operations are limited to the acquisition and financing of specific assets under more favorable terms, he said.
The commission is also being urged to lower ratings requirements for foreign corporate bonds to “BBB-“ from the present “BBB+” grade, as the two investment tools carry similar risks, according to the Life Insurance Association.
The association aims to collect all opinions by the end of next month so the FSC may take them into account when revising rules, Hsu said.