The Financial Supervisory Commission (FSC) yesterday lowered assumed interest rates by up to 75 basis points on insurance policies to reflect lingering uncertainty over the sector’s outlook.
The downward adjustments, set to take effect on Jan. 1, mean life insurers will have to set aside more reserves and raise insurance policy costs for products with tenures ranging from three to six years, the commission said.
The regulator trimmed assumed interest rates by 25 basis points on all currency-based insurance policies with three-year tenures and the adjustment will widen to 75 basis points for policies with six-year tenures or longer, the commission said in a statement.
Assumed interest rates will drop by between 50 and 75 basis points on euro-based insurance policies with six-year tenures more longer, the commission said, as the EU remains burdened by sovereign debt problems, although the crisis has stabilized somewhat, the commission said.
The adjustment may boost policy sales in the short term because customers may want to buy ahead of cost hikes, which may help insurers to maintain sufficient liquidity and reasonable profitability, the commission said.
Separately, the commission approved plans by CTBC Life Insurance Co (中信人壽) to acquire the local unit of Canada’s Manulife Insurance Co (宏利人壽).
CTBC plans to integrate the Canadian insurer on Jan. 1, after inking a deal in August to acquire Manulife for NT$724 million (US$24.04 million) as the local insurer seeks to increase its economies of scale.
The commission said it gave the go-ahead after CTBC Life promised to retain all Manulife employees and honor existing policies.