Thu, Mar 24, 2016 - Page 14 News List

New investment rules to ‘benefit’ some life insurers

By Crystal Hsu  /  Staff reporter

A recent policy change on investing in overseas real estate might benefit medium-sized life insurance companies, but will have little effect on their larger peers, international property consultancy CBRE Taiwan said yesterday.

The Financial Supervisory Commission unveiled new regulations governing investment in overseas real estate by insurance companies that might go into practice by the end of this month.

“The new rules will benefit medium-sized insurance companies with strong capitalization because they might allocate more funds to real-estate properties in foreign markets to pursue higher yields,” CBRE Taiwan managing director Joseph Lin (林俊銘) said in a report.

The incumbent regulations cap overseas real-estate investments at 10 percent of the net worth of local insurers. Under the new rules, their risk-based capital ratios will determine the ceiling, giving financially healthy insurers more investment flexibility, Lin said.

Real-estate properties, especially office buildings in gateway cities of advanced markets, will prove attractive investment targets given their relatively high rental yields, Lin said.

Rental yields in Taiwan have dropped to historic lows in recent years due to soaring property prices, but moderate rental increases, Lin said.

As a result, most properties in central Taipei fail to meet the minimum yield requirements of 2.485 percent, CBRE Taiwan said.

Investment opportunities overseas, which provide stable income streams and higher returns, will continue to attract Taiwanese insurers, despite the changes in total permitted allocations, Lin said.

However, large insurance companies might stay put because they have acquired properties overseas in recent years and would want to keep foreign stakes at allowed levels, Lin said.

Insurance companies may not apply for an additional quota for foreign investments once they exceed the limit, the commission said.

Domestic insurers are expected to display a strong interest in foreign properties because they generate stable fixed incomes, Lin said.

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