The Financial Supervisory Commission (FSC) on Tuesday announced a new risk-based capital (RBC) calculation for life insurers, which could free up about NT$80 billion (US$2.52 billion) in investment funds from the sector.
Under the commission’s new calculation, the risk weighting of Taiwanese stocks and exchange-traded funds (ETF) is to drop from 0.2274 to 0.2165, while the risk weighting for foreign stocks and ETFs in developed markets is to increase from 0.1884 to 0.2009 and that for developing markets is to climb from 0.2485 to 0.2887.
“The revised beta component is an improved reflection of the true amount of returns gained from an investment position,” Insurance Bureau Deputy Director-General Shih Chiung-hwa (施瓊華) told a news conference.
The revision is in line with the policies of FSC Chairman Ding Kung-wha (丁克華), who has promised to encourage domestic investments and stem the outflow of funds abroad.
However, Shih said the commission has no intention of deterring life insurers from investing abroad.
RBC requirements limit the amount of risk an insurer can take. They require companies to hold an amount of capital appropriate to their risk profiles.
The changes would translate into a 5 percent reduction in RBC requirements for investing in domestic stocks for life insurers, and a 19 percent reduction in ETFs tracking domestic stocks, the commission said.
The changes will begin affecting the financial sector before the end of this fiscal year as companies compile their financial statements, it said.
As of the end of May, life insurers’ investable funds were tallied at about NT$18.95 trillion, of which 60.07 percent have flowed overseas, while domestic securities accounted for 24.2 percent, Taiwan Insurance Institute data showed.
The bulk of domestic securities investments are in bonds, with local shares accounting for about 6 percent, data showed.
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