The Taiwan Insurance Guaranty Fund (TIGF, 保險安定基金) plans to set up an early warning system to strengthen oversight of domestic insurance companies after transferring the insolvent Kuo Hua Life Insurance Co (國華人壽) to its buyer at the end of this quarter, TIFG chairman Chu Yun-peng (朱雲鵬) said.
The semi-official fund, established in 2009 to oversee the insurance industry’s operations and safeguard the rights of policyholders, will formulate a preventive system that enables regulators to better supervise the sector’s performance and take action against rogue insurers in a timely manner, Chu said.
“An early warning system is necessary given the importance of the insurance industry to society as a whole,” Chu said. “TIGF may take up the challenge after wrapping up Kuo Hua’s ownership transfer.”
TIGF vice president Barry Tsai (蔡康) said the planned mechanism should include earnings reports and other information and tools to prevent a repetition of the Kuo Hua case.
Kuo Hua has been under TIGF receivership since August 2009 after it incurred NT$64.6 billion (US$2.18 billion at current exchange rates) in net losses and failed to raise new capital to ease its financial woes.
Tsai acknowledged that setting up a warning mechanism could be a daunting task since the fund only has a staff of 40, including six researchers.
With about 50 life insurance and non-life insurance companies in the nation, it would be a big burden on TIGF’s analysts, Tsai said.
However, Kuo Hua will continue to top TIGF’s agenda this quarter as the fund is organizing a NT$57 billion syndicated loan to cover losses, as stipulated in its transaction terms.
Transglobe Life Insurance Inc (全球人壽) won the auction for Kuo Hua with a bid of NT$88.37 billion in November, meaning it would be awarded the said amount by the government fund for taking over the troubled insurer.
A total of 39 lenders and insurance companies have voiced interest in taking part in the syndicated loan and TIGF will settle the matter on Feb. 27, Tsai said.
TIGF is still negotiating with Transglobe over the number of layoffs, hoping the buyer would retain 60 percent of Kuo Hua’s office staff, instead of the 50 percent Transglobe has promised, Tsai said, adding that Transglobe has agreed to keep all the sales agents.
The low-interest rate environment is unfavorable for life insurance companies, which must be very careful in their asset allocations to turn a profit, Tsai said.