Fubon Life Insurance Co (富邦人壽) and Taiwan Life Insurance Co (台灣人壽保險) again trimmed the declared interest rates for their interest-sensitive policies this month, while other major players have put their rate cuts on hold.
Life insurers announce their declared interest rates each month to calculate the size of bonuses they plan to distribute to policyholders.
The rates are mainly based on insurers’ investment returns, the Insurance Bureau said.
Fubon Life on Friday last week lowered the rates for its 64 New Taiwan dollar-denominated policies by 6 to 15 basis points to a range of 2.15 to 2.78 percent.
It also lowered the rates for its 31 US dollar-denominated policies and two yuan-denominated policies by 10 basis points to 3.15 to 3 percent.
It reduced the rates for its 13 Australian dollar-denominated policies the most, by 30 basis points, to 2.7 to 3 percent, the second rate cut since September last year, Fubon Life said.
The life insurance unit of Fubon Financial Holding Co (富邦金控) has trimmed the rates for all of its 110 interest-sensitive policies, and this month marks its fifth cut since April.
Fubon Life said in a statement that it decided to lower the rates, as the Reserve Bank of Australia on Oct. 1 reduced its base rate to 0.75 percent and the US Federal Reserve on Oct. 30 cut its benchmark interest rates for the third time this year, which is expected to reduce the company’s investment returns.
The declared rates for its Australian policies were lowered to below the products’ assumed interest rate of 3.25 percent, which means policyholders would not receive any bonuses, with Fubon Life saying that it reflected the change in benchmark rates.
Taiwan Life reduced the declared rates for its three NT dollar-denominated policies by 5 basis points to a range of 2.35 to 2.52 percent.
By comparison, other life insurers, including Cathay Life Insurance Co (國泰人壽), Nan Shan Life Insurance Co (南山人壽), Transglobe Life Insurance Co (全球人壽) and China Life Insurance Co (中國人壽) kept their declared rates unchanged this month.
Cathay Life maintained its rates, because last month it saw its internal rate of return pick up compared with September and August, Cathay Life executive vice president Lin Chao-ting (林昭廷) told the Taipei Times by telephone yesterday, adding that the global financial market is also turning bullish.
“We determine the rates mainly based on past investment performance, rather than potential changes in the market,” Lin said.
Increases in 10-year US Treasury yields and US corporate bond rates last month boosted the company’s investment returns, so Cathay Life felt there was no reason to cut the declared rates this month, Lin said.
Besides, the declared rates for the company’s NT dollar and US dollar-denominated polices are already comparatively low compared with its local peers, so Cathay Life needs to be more cautious about rate changes, he added.
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