Life insurance companies will soon be allowed to increase their investments in property overseas after the Financial Supervisory Commission on Tuesday announced plans to lower its investment hurdles.
The commission, which has banned life insurers from buying commercial properties at home since November last year, unveiled deregulation plans that would allow them to invest more in China and in foreign bonds with lower credit ratings.
The regulatory easing would take effect a week after the announcement, enabling life insurers more investment options to digest idle funds and improve earnings abilities, the commission said.
Insurers would eventually be able to set up special-purpose vehicles to handle commercial property investments that may be exempted from the 10 percent ceiling on exposures to China after gaining regulatory approval, the commission said.
Life insurers had asked the commission to shift the limit from 10 percent of their net worth to 3 percent of total assets under management, the Life Insurance Association of the Republic of China (壽險公會) said earlier.
In addition, the commission said it would lower ratings requirements for foreign corporate bonds to “BBB-” from the present “BBB+” grade if the insurers keep their risk-based capital ratios above 250 percent.
Insurance companies with capital adequacy of 200 percent may buy “BBB” bonds, the commission said.
The planned liberalization would allow insurers to invest an extra NT$300 billion (US$10 billion) in foreign corporate bonds, generating NT$12 billion more in fixed income compared with interest income from Taiwanese time deposits.
Cathay Life Insurance Co (國泰人壽), the nation’s largest insurer by market share, said in a stock exchange filing on Tuesday that it had gained regulatory approval for a property investment valued at 700 million yuan (US$112.95 million) in Shanghai, China.
The new investment came after the insurer spent 680 million yuan in September last year buying five floors of an office building in the same district.