The Financial Supervisory Commission (FSC) plans to further tighten requirements for domestic life insurance companies wishing to buy real estate. The restrictions loom as life insurance firms have become major real-estate players, pushing commercial property prices to new highs despite tighter thresholds.
Nan Shan Life Insurance Co (南山人壽), Shin Kong Life Insurance Co (新光人壽) and Transglobe Life Insurance Inc (全球人壽) all made real-estate acquisitions last week.
The commission — which in August raised the minimum yields on real-estate investments from 1.875 percent to 2.125 percent — is considering hiking the rate to 2.875 percent and imposing bans on short-term transfers of undeveloped land and commercial properties to prevent property speculation, Insurance Bureau Director-General Joanne Tseng (曾玉瓊) said yesterday.
“Recent developments in the [property] market warrant policy revisions to ensure that life insurance companies exercise caution and prudence when planning asset allocations and long-term investments,” Tseng said.
Life insurers should refrain from real-estate investments, while the bureau is refining the rules as they may affect past deals, Tseng said.
Competition among life insurers to park idle funds has led to generous offers for commercial properties as shown by auctions this year, Tseng said, adding that the trend is worrying because insurers could find themselves in financial trouble should property prices fall.
To avoid this, the commission is considering lifting minimum yields by an extra 75 basis points after a previous hike of 25 basis points failed to achieve the intended effect, the insurance official said.
The commission also plans to ban insurers from reselling undeveloped land within 10 years of purchase and existing commercial properties within five years, Tseng said.
“We will have more exchanges with insurance companies before finalizing the details,” she said. “Some are skeptical about the restrictions, while others say they will not affect long-term investments.”
The tighter requirements could remove life insurers from the market as current yields hover at about 2.5 percent, property analysts said.
DTZ general manager Billy Yen (顏炳立) said commercial property transactions could be halted if the commission carried out its plan.
“Insurance firms have been a pillar of the market and their absence would spell its collapse,” Yen said.
Gordon Kao (高銘頂), general manager of Savills Taiwan Ltd (第一太平戴維斯), agreed, saying the planned requirements would cause havoc.