The Financial Supervisory Commission yesterday said it had amended its regulations governing investments in overseas insurance-related businesses by Taiwanese insurance companies.
The new rules will take effect after going through routine administrative procedures, the commission said in a statement posted on its Web site.
The commission said the new regulations were designed to provide domestic insurers with more investment channels, while helping to enhance the efficiency of fund utilization.
The commission in June revised regulations regarding Taiwanese insurers’ overseas investments in insurance-related businesses — excluding those in China — so that they no longer count toward their overseas investment threshold.
Overseas investments are capped at 45 percent of insurers’ working capital, based on government regulations.
At that time, the commission said domestic insurers gaining approval from overseas financial authorities could invest in foreign insurance companies, insurance agencies and brokerages, or other related businesses.
The commission yesterday expanded the scope of areas in which Taiwanese insurers can invest to include foreign banks, credit card issuers, securities and futures brokerages, securities investment trust firms and those providing financial leasing services, according to the commission’s statement.
The amended rules would also allow domestic insurers greater flexibility to invest in overseas financial advisory firms, risk management companies and those offering asset management services, the commission said.
Domestic insurers’ total annual premium income grew at an average 8 percent in each of the past 10 years to NT$2.7 trillion last year from NT$1.2 trillion in 2003, according to data compiled by the commission.
However, returns on local investments have suffered, with the central bank maintaining the policy interest rate at 1.875 percent for the past 12 quarters, leaving the insurance sector’s 3.8 percent weighted average liability cost still significantly higher than its recurring investment yield of 2.8 percent as of last year, the commission’s data showed.
As a result, local insurers generally sitting on high levels of idle funds have long called for the government to raise their overseas investment cap or expand the scope of areas in which they can invest domestically or abroad to reduce cost of liability while enhancing investment returns.
The commission has recently allowed insurers to acquire commercial properties overseas to generate rental income, as soaring real-estate prices at home make investments unable to meet the yield requirement of 2.875 percent.
Meanwhile, local insurers are also seeking approval for new investments such as structured notes, securitized government assets and yuan-based bonds to increase returns.
Additional reporting by Bloomberg
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