The Financial Supervisory Commission (FSC) last week lowered the minimum yield requirement for domestic insurance carriers investing in commercial real estate by 1 basis point to 2.555 percent, aiming to bring improved capital utilization across the sector.
The change was implemented to reflect a downturn in the real-estate market and tax amendments, such as a combined tax on land and house sales, the commission said.
The requirement has served its purpose, FSC Chairman William Tseng (曾銘宗) said.
In the long term, the commission is looking to continue easing the requirement and intends to let insurers set their own minimum yield requirements, he said.
It is no longer appropriate for regulators to impose a minimum return on insurers, he added.
The commission first imposed a minimum yield requirement for domestic insurers in early 2011, with the rate set at 1.875 percent, and raised the figure to 2.125 percent in August 2012. It then raised it again to 2.875 percent three months later.
FSC data showed that despite the measure, real-estate investments by insurers have continued to grow from about NT$321.1 billion (US$9.79 billion) in 2008 to NT$1.12 trillion as of the end of September.
Coinciding with the central bank’s interest rate cut in September, the commission lowered the requirement to 2.085 percent. Even so, life-insurance firms had shown little interest in two high-profile office building auctions last month for the Shinkong Manhattan World Trade Building and the A8 building near the Shin Kong Mitsukoshi Department Store (新光三越百貨) in Taipei’s Xinyi District (信義), with the two properties expected to be unable to meet the required minimum yield.
The domestic insurance sector is estimated to have about NT$20 trillion in funds available for investment, with much of that amount having been transferred abroad due to the lack of viable investment targets in the nation, Life Insurance Association of the Republic of China (壽險公會) chairman Paul Hsu (許舒博) said.
In August, the association urged the commission to cut the requirement by 3 basis points, Hsu said.
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