Insurance companies would be barred from investing in foreign bonds with credit ratings lower than “BBB+” once amendments to the Rules Governing Foreign Investments by Insurance Companies (保險業辦理國外投資管理辦法) take effect, the Financial Supervisory Commission said on Tuesday.
The commission said it would collect public opinion over the next 14 days after the Insurance Bureau released the draft amendment the same day.
The amendments would take effect by the end of this year if everything proceeds smoothly, it said.
Bonds issued by foreign banks or listed companies must have a credit rating equivalent to “BBB+” or above, while those issued by foreign local governments must have a rating of at least “A-” from credit ratings agencies such as Moody’s Investors Service, Standard & Poor’s Global Ratings and Fitch Ratings Ltd, Insurance Bureau Deputy Director-General Wang Li-hui (王麗惠) said.
“That is expected to give insurers a clearer view of what they are investing in and help them better monitor the risk of their investments,” Wang said.
Foreign bonds are an important investment target for Taiwanese insurance companies seeking high returns, and make up a large portion of insurers’ total overseas investments, she said.
However, if insurers are financially strong, they may invest in bonds that are issued by foreign banks and listed companies with ratings equivalent to “BBB-” or “BB+,” the bureau said, but added that there would be limits to such investments.
Insurers that have not breached any overseas investment rules over the past year, have risk management committees under their board of directors and have risk-based capital ratios higher than 250 percent would be considered financially strong, the bureau said.
The proposed amendment is also expected to allow insurance companies to invest in privately placed bonds, the bureau said.
An insurer’s combined investment in lower-rated bonds, privately placed bonds and other issues with higher risk would be capped at 5 percent of its capital, the bureau said.
Taiwan’s life insurance companies had a combined capital of NT$26 trillion (US$852 billion) as of Sept. 30, higher than NT$23.85 trillion at the end of last year, bureau data showed.
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